POLICY MANAGEMENT SYSTEMS CORP, 10-K/A, 1994-11-23

POLICY MANAGEMENT SYSTEMS CORP
10-K/A, 1994-11-23
INSURANCE AGENTS, BROKERS & SERVICE

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PAGE <1>

RESTATED - SEE "INTRODUCTORY NOTE".

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1992 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 of (IRS Employer Identification No.)
incorporation or organization)

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

Registrant's telephone number, including area code (803) 735-4000

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
Common Stock, par value $.01 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X

The aggregate market value of the voting stock held by non-affiliates of the
registrant was $1,824,082,520 at March 1, 1993 based on the closing market price
of the Common Stock on such date, as reported by the New York Stock Exchange.

The total number of shares of the registrant's Common Stock, $.01 per share
par value, outstanding at March 1, 1993 was 23,534,164.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Specified sections of the registrant's 1992 Annual Report to stockholders
are incorporated by reference in Part II hereof.

(2) Specified sections of the registrant's 1993 Proxy Statement in connection
with its 1993 Annual Meeting of Stockholders are incorporated by reference
in Part III hereof.

PAGE <2>

INTRODUCTORY NOTE

THE INFORMATION CONTAINED HEREIN HAS BEEN RESTATED IN NOVEMBER
1994 TO REFLECT ADJUSTMENTS RESULTING FROM SPECIAL AUDITS OF THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS (SEE NOTE 2 OF NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS). UNLESS OTHERWISE STATED,
HOWEVER, INFORMATION CONTAINED HEREIN IS AS OF DECEMBER 31, 1992.

PART I

ITEM 1. BUSINESS
THE COMPANY

ORGANIZATION AND GENERAL DEVELOPMENT

Policy Management Systems Corporation ("Company") is a South
Carolina corporation incorporated in 1980. Prior to incorporation,
the Company operated as the PMS Division of Seibels, Bruce &
Company, a wholly-owned subsidiary of The Seibels Bruce Group,
Inc., an insurance holding company. At December 31, 1992, the
Company had 4,363 full-time employees located in offices
throughout North America, Europe and Australia.

The Company is currently a leading provider of standardized
insurance software systems and automation and administration
support and information services to the insurance industry.

Prior to 1985, the Company operated primarily as a provider of
insurance software systems and related automation support services
to property and casualty insurance companies. Since that time,
the Company has broadened its software product and services
offerings and the marketplace which it serves through the
introduction of new internally developed products and services and
business and software product acquisitions.

In 1985, the Company began offering certain information
services to assist underwriters and claims professionals in the
property and casualty insurance marketplace. Since then, the
Company has expanded its operations and information services
offerings to the point that it now offers a full range of
information services and related data base products to the entire
insurance industry.

In 1986, the Company took its initial step toward becoming a
major supplier of automation solutions to providers of life and
health insurance by offering software systems and related
automation support services designed specifically for the group
insurance products of these organizations. Since then, the Company
has continued to expand its product and services offerings to this
market and is currently recognized as a leader in providing
automation solutions to providers of individual and group life and
health insurance and managed care, with over 140 customers in that
marketplace.

PAGE <3>

During the early stages of the Company's development, a major
portion of the Company's revenues were derived from systems
licensing activities (43.7% in 1985). As the Company has continued
to enhance its position as a provider of a full range of business
solutions, based upon automation, administration support and
information, to the entire insurance industry, the portion of the
Company's revenues derived from systems licensing activities has
steadily declined, representing only 14.9% of total revenues in
1992. The remainder of the Company's revenues are derived primarily
from automation and administration support and information services
activities.

The Company has always employed a business strategy of
emphasizing stability of revenues by building a larger base of
recurring systems licensing and services revenues. As a result of
this emphasis, initial license charges, that portion of license
charges from systems licensing activities which is recognized as
revenue upfront upon execution of a license obligation and delivery
of the product, have continually declined, representing only 5.6%
of total revenues in 1992, compared to 16.4% in 1985.

Prior to 1989, the Company and International Business Machines
Corporation ("IBM") had worked together under various business
arrangements (formal and informal). In 1989, the relationship was
strengthened through the acquisition of a 19.8% minority equity
interest in the Company for $116.8 million by IBM (see Note 8 of
Notes to Consolidated Financial Statements). As part of this
transaction and through subsequent additional agreements, IBM and
the Company work closely together to develop and market automated
solutions for the insurance industry. The Company is currently
the only company recognized by IBM as an IBM Insurance Applications
Affiliate. This business relationship with IBM has and will
continue to enable the Company to expand more rapidly to meet the
growing needs of the insurance industry.

SEGMENT INFORMATION

The Company operates in one business segment, the providing of
computer software systems and automation and administration support
and information services to the insurance industry. With the
exception of the Company's motor vehicle reports service, which is
provided as part of its information services offerings and
accounted for 14%, 16% and 17% of total revenues in 1992, 1991 and
1990, respectively, no one product or service of the Company
accounted for more than 10% of total revenues.

See Marketing and Customers for revenues pertaining to
geographical area.

PAGE <4>
PRODUCTS AND SERVICES

The Company offers over 125 business solutions, which include
more than 90 application software systems and a wide range of
outsourcing, professional and information services, designed to
meet the needs of all sectors of the insurance industry.

The Company's primary software systems run on medium and large
scale IBM computers utilizing most IBM operating systems. In
addition, a number of systems run on intelligent workstations.

Most customers licensing the Company's software systems use
the Company's professional services, which are separately charged
for and normally provided under separate agreements. Many
customers using the Company's information services do not license
the Company's software products. Over 100 customers currently
utilize the Company's various outsourcing services, which are
provided under contracts having terms up to ten years.

SOFTWARE PRODUCTS

The Company's software products automate most insurance
processing functions, as well as various accounting, financial
reporting and cash management functions of insurance
organizations. The systems have been designed to permit ease
of use and provide flexibility in adapting them to a
particular customer's requirements and modifying them as business
conditions change. The systems are modular in structure and
facilitate the application of updates and enhancements and
interfacing and integration of the different systems. Most of
the systems will operate on either a stand-alone basis or in
conjunction with each other. The architecture and technologies
contained in the Company's software products have undergone
dramatic change during the past several years as the various
functions contained in these products have and continue to be
adapted to the Company's new generation of integrated systems
currently under development, Series III.

Series III technologies will serve as the platform for the
Company's systems for all sectors of the insurance industry for the
next several years. A primary objective of Series III is the full
integration of the information and data gathering, processing,
underwriting, claims handling and reporting processes for
providers of all types of insurance to create a true cooperative
processing environment where insurance professionals, using
advanced intelligent workstations, can process multiple tasks
concurrently with minimal clerical support and data entry. The
foundation of Series III is the Company's Integrated Application
Platform ("IAP"), more fully described below. IAP facilitates the
development of systems complying with IBM's Systems Application

PAGE <5>

Architecture ("SAA"), which provides consistent standards for
technology, programming, communications and system interfaces and
enables portability across and connectivity to multiple computing
platforms. Series III uses advanced and emerging technologies such
as relational data bases, digitized voice, expert systems and
imaging. Series III technologies allow system upgrades, additions
and interfaces to be implemented much quicker and at reduced
costs, with a minimum of disruption to ongoing operations.
Using relational data bases and cooperative processing between
hardware platforms and allowing access to data from multiple
sources through advanced networks, Series III provides a
seamless flow of information between insurance agents, branch
offices and home office insurance companies.

Although development efforts for the initial full release
of Series III for all sectors of the insurance industry will
continue through 1995, major components of Series III have been
delivered since development began in 1987. The BCMS, BCWS, MIS,
MWS, MDS, MMS, UWS, UMS, CHS, CWS, LWS, PDSS, AIS, CIS, CIWS, WIP,
FMS and IAP systems described below include Series III
technologies. The Company currently has 63 Series III customers
(property and casualty, life and health, large and small and
domestic and foreign) who have licensed various Series III
components.

The following is a detailed description of the Company's
current principal software products:

POLICY MANAGEMENT SYSTEM ("PMS") - PMS, the Company's most
comprehensive and widely used mainframe system, performs the
functions essential to all phases of the management of property
and casualty insurance policies. This system, which supports all
lines of business written by property and casualty insurance
companies, is designed to reduce paper work dependency,
facilitate rapid access to information and improve service.
Principal automated functions performed by PMS are policy rating
and premium calculation, policy printing, renewal and endorsement
generation, claims administration and management, billing and
collection and certain reinsurance processing.

ADVANCED PROCESSING SYSTEM ("APS") - APS is designed to run
on IBM's AS/400 computer, providing the basic systems functions
(including policy, claims and financial management and
reporting) essential to property and casualty insurance companies
with annual direct written premiums of up to approximately $100
million.

BILLING AND COLLECTION MANAGEMENT SYSTEM ("BCMS") - BCMS
facilitates efficient management of billing and receivables for
all types of insurance policies on both an individual and

PAGE <6>

consolidated basis. The system features user defined pay plans,
finance and service charges and delinquency plans and supports
payroll deduction plans.

BILLING AND COLLECTION WORKSTATION ("BCWS") - An intelligent
workstation based system designed for use in conjunction with BCMS
to capture, maintain, and display billing information.

INSURANCE MANAGEMENT INFORMATION SYSTEM ("IMIS") - A
management information and reporting system that provides
premium, loss experience, reinsurance and actuarial reporting to
satisfy insurance company management and statutory reporting
requirements for property and casualty insurance companies.

MANAGEMENT INFORMATION SYSTEMS ("MIS") - An on-line system
that provides data generation and manipulation capabilities to
fulfill the management, annual statement, actuarial, bureau, and
other reporting requirements of all types of insurance companies.

MANAGEMENT WORKSTATION ("MWS") - An intelligent workstation
based system designed for use in conjunction with MIS to capture
and display management information.

MANAGEMENT DECISION SUPPORT ("MDS") - MDS provides insurance
professionals with the capability to design and run queries against
information contained in relational data bases and allows on-line
access to current and historical versions of various standard
reports.

MICRO MAINFRAME SYSTEM ("MMS") - An intelligent workstation
based system designed to meet the full policy processing and
rating needs of property and casualty insurance companies. MMS
emulates mainframe functions on a workstation allowing the
maintenance of software rating applications that run in either a
mainframe or workstation environment.

UNDERWRITING WORKSTATION ("UWS") - An intelligent workstation
based system which provides a seamless flow of underwriting
information throughout an insurance organization and fully
automates the rate, quote, and policy issuance processes with no
need for manual intervention.

UNDERWRITING MANAGEMENT SYSTEM ("UMS") - An integrated
system providing the capability to store and manage policy
information in a central location to facilitate the accuracy and
consistency of underwriting decisions.

CLAIMS HANDLING SYSTEM ("CHS") - An intelligent
workstation based system which automates most claims handling
related functions of property and casualty insurance

PAGE <7>

companies, including claims payments, and facilitates the
uploading and downloading of claims information between host and
remote computers.

CLAIMS WORKSTATION ("CWS") - An intelligent workstation based
system that completely automates the claims handling processes, as
well as providing access to the various claims functions and
information in a distributed environment.

PMS/LIFE - A comprehensive system designed foradministration
of individual life, annuity and health insurance policies.

LIFE WORKSTATION ("LWS") - LWS provides data entry,editing,
premium calculation, information retrieval and document preparation
support for individual life and health insurance products.

PRODUCT DEVELOPMENT SUPPORT SYSTEM ("PDSS") - PDSS facilitates
and expedites the development of new and modification of existing
life and health insurance products by centralizing product rules
and information into a building block format for easy, timely
access and manipulation. Once product rules and information are
input, they can be used for a number of different products.

GROUP ADMINISTRATION SYSTEM ("GROUP COMM") - A group insurance
administration system that automates and consolidates most
functions relating to new business and policy maintenance, billing
and collection, premium accounting, commissions and reinsurance.

CLAIMS ADMINISTRATION AND PAYMENT SYSTEM ("CAPS") - CAPS
facilitates the administration and payment of claims covered under
most health insurance plans. CAPS, with advanced capabilities
supporting the cost management and extensive data collection needs
of most health insurers, is utilized primarily by large health
insurance companies and Blue Cross and Blue Shield organizations.

CLAIMS ADMINISTRATION SYSTEM ("CAS II") - CAS II supports
health insurance cost management programs, such as Preferred
Provider Organizations, precertifications and second surgical
opinions, and offers easy-to-use processing for claims covered
under most health insurance plans.

GROUP ADMINISTRATION AND BILLING SYSTEM ("ADMIN") - A group
health insurance billing and administration system which
automates and integrates membership, premium calculation, billing
and collection, receivables, arrears and information management.
This product is used primarily by large health insurance companies
and Blue Cross and Blue Shield organizations.

PROVIDER ADMINISTRATION AND REIMBURSEMENT SYSTEM ("PA&R") - A
system designed to assist group health insurers in tracking health

PAGE <8>

care costs and expenses by provider and facilitate reimbursement
thereof.

MULTIPLE OPTION SOLUTION ("MOS") - A comprehensive series of
systems designed for complete administration and management of most
indemnity and managed care health products.

AUTOMATED INFORMATION SYSTEM ("AIS") - An integrated
information order, delivery, evaluation, and management platform
featuring a mainframe data base that can be accessed by terminals
or intelligent workstations via cooperative processing. AIS allows
users to access information designed to facilitate the insurance
underwriting and claims settlement process from multiple vendors.

CLIENT INFORMATION SYSTEM ("CIS") - A system which serves as
a common repository of information relating to an insurance
company's clients and provides an index to other corporate data.
CIS bridges computer systems, regardless of the software product
and vendor, and displays all business relationships that exist
between the client and the insurance company.

CLIENT INFORMATION WORKSTATION ("CIWS") - An intelligent
workstation based system that captures and displays information
about any person, company, prospect or provider who has a
relationship with an insurance company.

WORK IN PROCESS ("WIP") - WIP facilitates the management,
including tracking, assigning, reassigning and controlling, of all
tasks generated in an insurance company environment.

CORPORATE INVESTMENT MANAGEMENT SYSTEMS ("CIMS") - A series of
investment systems designed for managing complex investment
portfolios which handles most types of securities and includes
portfolio segmentation, asset valuation and complete accounting
control capabilities. These systems, which will operate on a
stand-alone basis or in conjunction with each other, may be used by
all types of insurance companies.

FINANCIAL MANAGEMENT SYSTEM ("FMS") - An integrated accounting
and financial reporting system which includes general ledger and
budgeting capabilities, distribution of income and expense data by
categories and the preparation of a variety of financial and
accounting reports.

INTEGRATED APPLICATION PLATFORM ("IAP") - A technicalplatform
which, using cooperative processing technologies, provides the
capability to develop applications and link software systems,
whether they be those of the Company or another party, that take
advantage of IBM's Systems Application Architecture ("SAA").

PAGE <9>

SERVICES

The following is a detailed description of the Company's current
principal services offerings:

OUTSOURCING SERVICES - The Company offers a full complement of
outsourcing services from its four shared data centers located in
Columbia, Dallas, London and Sydney, Australia. These services
range from providing processing capabilities for unique, highly
regulated lines of business such as Massachusetts automobile, Texas
personal lines and automobile assigned risk plans; to providing
complete processing capabilities for all or most of a customer's
business by making available software systems licensed from the
Company on a remote basis; to assuming complete systems management,
processing and administration support responsibilities for a
customer, including complete policyholder services and claims
support.

INFORMATION SERVICES - The Company offers a wide range of
information services which are packaged to facilitate efficient
review and use and may be ordered and received on an automated
basis through the Company's nationwide telecommunications network
using the Company's database products. These information services,
which are designed to assist insurance professionals in making
better decisions about risk selection, pricing and claims
settlement, currently include motor vehicle (driving record)
reports, undisclosed driver information, driver mileage
verification, claims histories, credit reports and histories,
property inspection and valuation reports, property claims
estimating, premium audits, physician reports and medical
histories.

PROFESSIONAL SERVICES - In addition to the services described
above, the Company offers a full range of professional services to
assist customers in attaining the most effective use of their
systems. These services include systems implementation and
integration assistance and consulting and education.

PAGE <10>

MARKETING AND CUSTOMERS

The Company markets its products and services to approximately
3,200 property and casualty insurance companies, over 6,000 life
and health providers and independent agents and adjusters in the
United States and Canada. In addition, the Company offers its
software products and automation and administration support
services in 23 foreign countries. At December 31, 1992, the
Company was providing its information services to more than 9,000
insurance companies, agents and adjusters and had a total of 3,183
software systems licenses in force. No individual customer
accounted for more than 10% of total revenues in any of the three
years ended December 31, 1992.

The Company markets its products and services through a staff
of 180 employees, including salesmen and marketing support
personnel, most of whom are specialists in the insurance industry
and data processing. The Company's marketing force works
extensively with each prospective customer, analyzing its specific
requirements. Consequently, this process may extend over several
months for a prospective customer looking for a major automation,
administration support or information solution.

In addition to its own software products, the Company markets
certain software products of other parties to its customers.
Typically, these products are designed to perform noninsurance
specific functions or to improve the control and productivity of
computer resources.

The majority of the Company's revenues are generated from
products and services provided in the United States. The following
table illustrates the relative percentages of total revenue
represented by the Company's products and services in the United
States and foreign countries.
Percent of Revenue
Year ended December 31,
1992 1991 1990
(Restated) (Restated) (Restated)
United States............ 84.5 88.3 89.3
Canada................... 3.5 3.6 4.3
Europe................... 8.3 5.7 5.5
Asia..................... 3.7 2.4 .9

Pursuant to a Development and Marketing Agreement entered into
between the Company and IBM in connection with IBM's acquisition of
an equity interest in the Company in 1989 and later expanded upon
(see Note 8 of Notes to Consolidated Financial Statements), IBM, in
addition to providing the Company with certain assistance in
developing certain of its software products (see Product
Development), works with the Company in identifying and developing

PAGE <11>

additional software applications for the insurance industry,
offering combined software and services solutions to mutual
customers and establishing joint sales and marketing programs to
promote applications software and services to the insurance
industry, particularly in the international and large company
marketplace. This close relationship with IBM has and will
continue to assist the Company in accelerating the development and
marketing of its products and services worldwide.

PAGE <12>

LICENSING

The Company's revenues are generated primarily by licensing to
customers standardized insurance software systems and providing
automation, administrative and information services to the
insurance industry.

Software systems are licensed under the terms of substantially
standard nonexclusive and nontransferable license agreements, which
generally have a noncancelable minimum term of six years and
provide for an initial license charge and a monthly license charge.
The initial license charge grants a right to use the software
system available at the time the license is signed. The monthly
license charge provides access to Maintenance, Enhancements and
Services Availability ("MESA"). Under the maintenance provisions
of MESA, the Company provides telephone support and error
correction to current versions of licensed systems. Under the
enhancement provisions of MESA, the Company will provide any
additions or modifications to the licensed systems, which the
Company may deliver from time to time to licensees of those systems
if an when they become generally available. Services availability
allows customers access to professional services, other than
maintenance and enhancements, which are provided under separate
arrangements during the MESA term.

The Company also offers information and outsourcing services
ranging from making available software licensed from the Company on
a remote processing basis from the Company's data centers, to
automated information services through the Company's North America
telecommunications network using the Company's database products.
Outsourcing services are typically provided under contracts having
terms from three to ten years.

PAGE <13>

COMPETITION

The computer software and services industry is highly
competitive. Based upon its knowledge of the industry, the Company
believes it is a leading provider of comprehensive insurance
software systems and automation and administration support and
information services to the insurance industry. Competition is on
the basis of service, price and technological advances. Property
and casualty insurers who internally develop systems similar to
those of the Company, along with their affiliates, are not likely
to become customers of the Company. To the Company's knowledge,
no such in-house systems are being marketed to other companies.
There are certain providers of life and health insurance who have
internally developed systems similar to those of the Company and
market these systems to other companies. There are also a number
of independent companies who offer software systems which perform
one or more of the functions performed by the Company's systems.

There are a number of larger companies, including computer
manufacturers, computer service and software companies and
insurance companies, who have greater financial resources than the
Company and the technological ability to develop software products
similar to those offered by the Company.

There are a number of companies who provide information
services similar to those provided by the Company to the insurance
industry. These companies, especially the larger ones, present a
significant competitive challenge to the Company's information
services business growth, but the Company believes that it can
meet this challenge through its knowledge of the insurance industry
and its ability to meet the customer's needs.

The Company believes that the most important considerations
for potential consumers of its products and services are product
capability, ease of installation and use, reliability and quality
of technical support, documentation and training, integration of
the products and services capabilities and the experience and
financial stability of the Company.

PAGE <14>

PRODUCT DEVELOPMENT

The history of the automated data processing industry has seen
rapid changes in hardware and software technology. The Company
must maintain the usefulness of its products and services, as well
as modify and enhance them to accommodate changes to, and to insure
compatibility with, hardware and software. To date, the Company
has been able to adapt its products to such changes, and the
Company believes that it will be able to do so in the future. The
Company must continually ensure that its products meet the needs of
its customers in the ever-changing marketplace. Accordingly, the
Company has continually enhanced, improved, adapted and added new
features to its products, in addition to developing new, additional
products.

An example of the Company's continuing product development
efforts to ensure that it is in a position to meet the growing
automation needs of the insurance industry is the Company's new
generation of systems, Series III (see Products and Services,
Software Products). The Company's efforts on Series III
development have been further enhanced by IBM, pursuant to the
Development and Marketing Agreement between the Company and IBM
(see Marketing and Customers), providing the Company with certain
machines, programs and services to assist in the continuance of the
Company's conversion of its major insurance industry applications
software to IBM's System Applications Architecture ("SAA")
requirements and the development of other SAA based insurance
industry applications software.

In an effort to maintain and strengthen its competitive
position, the Company expends substantial amounts on internal
product development. Expenditures for internal product
development, which were capitalized, were $24.3 $28.7 and $27.8
million in 1992, 1991 and 1990, respectively, representing 5.0%,
7.0% and 8.1%, respectively, of total revenues. In addition to its
continuing development efforts, the Company has, in the past
several years, expended significant amounts on business and
software product acquisitions in an effort to expand its product
and services offerings and its presence in the marketplace. The
Company acquired software products with a cost basis of $17.7, $1.6
and $1.8 million in 1992, 1991 and 1990, respectively, representing
3.5%, .4% and .5%, respectively, of total revenues. The Company
intends to continue to expand its product and services offerings
through internal development and acquisitions.

PAGE <15>

ITEM 2. PROPERTIES

The Company owns its Columbia, South Carolina, headquarters
complex and 145 acres of land on which the facility is located. In
early 1993, the Company completed construction of a 176,000 square
foot addition to its corporate headquarters costing $16.2 million.
The Company leases space for its regional and branch offices under
various leases. See Notes 3 and 4 of Notes to Consolidated
Financial Statements.

The Company, throughout its data centers located in North
America, Europe and Australia, utilizes 16 large to small-scale
mainframe computers. All computers are owned or held under
long-term leases. In total, these computers have 3,814 megabytes
of memory and are capable of processing approximately 458.2 million
instructions per second. The Company is currently utilizing 80% to
85% of this capacity. See Notes 3 and 4 of Notes to Consolidated
Financial Statements.

The Company relies upon contract, intellectual property,
copyright and other bodies of law to protect its products as trade
secrets and confidential proprietary information. The Company's
license agreements restrict disclosure to third-parties and the use
of its systems by customers to their own operations. The Company
also informs each of its employees of the proprietary nature of its
products and obtains an agreement not to disclose proprietary
information. Notwithstanding those restrictions, it may be
possible for competitors of the Company to obtain copies of its
products. The Company actively attempts to protect its trade
secrets and rigorously enforces the nondisclosure provisions of its
license agreements. The Company has registered service marks or
pending applications for registration for all of its primary
software products.

ITEM 3. LEGAL PROCEEDINGS

The Company has no material pending nor threatened litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PAGE <16>

EXECUTIVE OFFICERS OF THE REGISTRANT

Name Age Position

G. Larry Wilson 46 Chairman of the Board, President and
Chief Executive Officer
David T. Bailey 46 Executive Vice President
Charles E. Callahan 44 Executive Vice President
Donald A. Coggiola 53 Executive Vice President
Robert L. Gresham 50 Executive Vice President, Secretary
and Treasurer
Bernard C. Mazon 43 Executive Vice President
Jeffrey S. Bragg 44 Senior Vice President
James P. Brown 46 Senior Vice President and
General Counsel

G. Larry Wilson - President and Chief Executive Officer of the
Company since 1980 and Chairman of the Board (since 1985). Has had
overall responsibility for management of the Company since its
inception. Director of The Seibels Bruce Group, Inc., Columbia,
South Carolina.

David T. Bailey - Executive Vice President (since 1986).
Responsible for the Property and Casualty Insurance Group.
Employed by the Company since 1981.

Charles E. Callahan - Executive Vice President (since 1989).
Responsible for the Life Insurance Group. Employed by the Company
since 1983.

Donald A. Coggiola - Executive Vice President (since 1986).
Responsible for the Industry Markets Group. Employed by the
Company since 1979.

Robert L. Gresham - Executive Vice President, Secretary and
Treasurer (since 1986). Responsible for the Operations Group.
Employed by the Company since 1978.

Bernard C. Mazon - Executive Vice President (since 1990).
Responsible for the Health Insurance Group. Employed by the Company
since 1987.

Jeffrey S. Bragg - Vice President (1987 to January 1993) and
Senior Vice President (since January 1993). Responsible for the
Insurance Services Group. Employed by the Company since 1987.

James P. Brown - General Counsel (since 1986) and Senior Vice
President (since January 1992). Employed by the Company since
1982.

PAGE <17>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

MARKET INFORMATION

The Company's common stock is traded on the New York Stock
Exchange, symbol PMS. The Company has never paid or declared a
cash dividend on its common stock. The following table sets
forth for the calendar periods indicated the high and low market
prices for the Company's common stock.

1992
High Low

First Quarter................................ $73 $63
Second Quarter............................... 70 5/8 59 3/4
Third Quarter................................ 76 1/2 62 5/8
Fourth Quarter............................... 83 1/2 71 1/2

1991
High Low

First Quarter................................ $52 $39 3/8
Second Quarter............................... 51 43 3/8
Third Quarter................................ 55 1/2 47 1/4
Fourth Quarter............................... 66 3/8 51 3/4

Title of Class

Common Stock, $.01 par value

Number of Record Holders as of March 31, 1993
1,327

PAGE <18>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

(Unaudited) (Unaudited) (Unaudited)
(Restated) (Restated) (Restated) (Restated)
Results of Operations 1992 1991 1990 1989
(In Thousands, Except Per Share Data)

Revenues........................$489,261 $411,156 $341,692 $262,271
Operating income................ 78,971 63,659 51,207 43,046
Other income and expenses, net.. 11,792 9,117 4,222 2,257
Income before income taxes...... 90,763 72,776 55,429 45,303
Net income......................$ 61,522 $ 47,596 $ 37,166 $ 29,741

Net income per share............$ 2.65 $ 2.21 $ 1.92 $ 1.77
Fully diluted net income
per share.................... - $ 2.14 $ 1.80 $ 1.66

Financial Condition
Cash and equivalents and
marketable securities...... $238,522 $197,414 $152,994 $143,834
Working capital............... 286,687 232,245 200,098 193,808
Total assets.................. 706,942 632,692 529,249 476,580
Long-term debt and capital
lease obligations.......... 6,001 5,976 102,633 103,151
Total liabilities............. 127,866 132,813 201,841 188,631
Stockholders' equity.......... 579,076 499,879 327,408 287,949

The above data should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing in this Annual
Report on Form 10-K.

PAGE <19>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The consolidated balance sheet as of December 31, 1992 and the
related consolidated statements of operations, changes in
stockholders' equity and cash flows for the year then ended have
been audited and are restated herein. The consolidated balance
sheet as of December 31, 1991, and the related consolidated
statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 1991 and 1990 have been
restated by the Company, without audit, to conform to the
adjustments to the Company's retained earnings as of December 31,
1991, as discussed in Note 2 of Notes to Consolidated Financial
Statements. These adjustments include all adjustments which are,
in the opinion of management, necessary to state fairly the results
for the periods presented.

Results of Operations

Set forth below are certain operating items expressed as a
percentage of revenues and the percent increase for those items
from the previous year.

Percentage of Revenues Percent Increase
1992 1991 1990 1992 1991 1990
Revenues............ 100.0% 100.0% 100.0% 19.0% 20.3% 30.3%
Operating income.... 16.1% 15.5% 15.0% 24.1% 24.3% 19.0%
Income before
income taxes...... 18.6% 17.7% 16.2% 24.7% 31.3% 22.4%
Net income.......... 12.6% 11.6% 10.9% 29.3% 28.1% 25.0%

Revenues
Total licensing revenues were $73.0, $76.0 and $70.4 million
in 1992, 1991 and 1990, respectively, representing 14.9%, 18.5% and
20.6% of total revenues. Total licensing revenues for 1992
decreased $3.0 million (3.9%) compared to 1991, due primarily to a
reduction in initial license revenues ($6.4 million) related
primarily to a decrease in the property and casualty insurance
systems business. This decrease 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 $3.4 million (8.1%) compared to
1992. Total licensing revenues for 1991 increased $5.6 million
(8.0%) compared to 1990, due primarily to an increase in initial
license charges ($3.5 million), and an increase in MESA revenue
($2.1 million) related primarily to both the health and life
insurance systems businesses.

Total services revenues were $416.3, $335.2 and $271.3 million
in 1992, 1991 and 1990, respectively, representing 85.1%, 81.5% and

PAGE <20>

79.4% of total revenues. Changes in the total services revenue
were affected by activities in professional, outsourcing and
information services, as described more fully below.

Total revenues from professional and outsourcing servces for
1992 were $256.9 million as compared with $185.9 million for 1991.
This $71.0 million increase is primarily attributable to policy
management and processing services to the New Jersey Market
Transition Facility (MTF) project, facilities management and
outsourcing contracts in Europe and Australia and several new
outsourcing contracts in the United States. Revenues from
professional and outsourcing services increased $26.5 million for
1991 compared to 1990. This increase was primarily attributable to
policy management and processing services to the MTF project and to
an increase in professional services for both the life and health
insurance systems businesses.

Revenues from information services were $154.8, $147.3 and
$109.2 million for 1992, 1991 and 1990, respectively. The increase
between these years is primarily attributable to the acquisition of
PMS, Inc. (PMSI) of Waco, Texas, effective November 1, 1990 and to
an increase in new business associated with automobile property and
casualty information services. PMSI provides information services,
particularly attending physician statements and personal medical
history interviews primarily to life insurers throughout the United
States. Increases related to this acquired business were $7.2 and
$34.2 million for 1992 and 1991, respectively. 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 expense increased $10.9
million for 1992 compared to 1991, primarily as a result of
increased costs associated with European and Australian facilities
management and outsourcing contracts. The increase in employee
compensation and benefits expenses of $15.6 million for 1991
compared to 1990 results primarily from the acquisition of PMSI,
effective November 1, 1990.

Computer and communications expenses increased $8.9 million
for 1992 compared to 1991 and $3.5 million for 1991 compared to
1990. These increases were primarily related to increased costs
associated with policy management and processing services,
principally the MTF project and to European and Australian
facilities management and outsourcing contracts.

Information services and data acquisition costs increased
$13.5 million to $92.8 million for 1992 compared to $79.3 million
for 1991. The 1991 total reflects an increase of $25.6 million

PAGE <21>

compared to 1990. These increases are due primarily to the
acquisition of PMSI, effective November 1, 1990, and to an increase
in the volume of state fees for motor vehicle reports, related to
new business, which is part of the Company's property and casualty
information services business.

Other operating costs and expenses for 1992 increased $29.4
million compared to 1991 and increased $12.4 million for 1991
compared to 1990. These increases result primarily from increased
costs associated with providing total policy management outsourcing
services, principally the New Jersey MTF, costs associated with
European and Australian facilities management and outsourcing
contracts and to a lesser extent, the acquisition of PMSI.

Interest expense decreased $2.7 million for 1992 compared to
1991 and decreased $2.8 million for 1991 compared to 1990. These
decreases resulted from the redemption of the Company's $100
million, 5.5% Convertible Subordinated Debentures in May 1991.
Interest expense relating to this debt was $2.2 and $5.6 million in
1991 and 1990, respectively.

The effective income tax rate (income taxes expressed as a
percentage of pre-tax income) was 32.2%, 34.6% and 32.9% for the
years ended December 31, 1992, 1991 and 1990, respectively. The
decrease in the effective rate between 1992 and 1991 was due
primarily to an increase in nontaxable investment income. The
increase in the effective rate between 1991 and 1990 was due
primarily to an increase in amortization of goodwill relating to
business acquisitions, which is not deductible for income tax
purposes, and a decrease in research and experimentation tax
credits.

Liquidity and Capital Resources

December 31,
1992 1991
(In Millions)
Cash and equivalents and marketable
securities.................................. $238.5 $197.4
Current assets................................ 343.9 299.8
Current liabilities........................... 57.2 67.5
Working capital............................... 286.7 232.3
Cash provided by operations................... 107.8 83.6
Cash used for investing activities............ (127.4) (85.6)
Cash provided by financing activities......... 12.2 13.7

The Company's financial condition remained strong at December
31, 1992. Working capital was $286.7 million, including cash, cash
equivalents and marketable securities of $238.5 million as compared
to $197.4 million at December 31, 1991, a net increase of $41.1

PAGE <22>

million. Significant expenditures during 1992 included:
acquisition of data processing and communications equipment,
support software and office furniture and equipment used in the
Company's operations ($43.5 million); acquisition of businesses and
software products, including debt and contingency payments relating
to past business acquisitions ($10.3 million); and payments for
construction of additional office facilities at the Company's
corporate headquarters ($9.4 million).

Significant nonrecurring expenditures anticipated for 1993 are
as follows: acquisition of data processing and communications
equipment, support software and office furniture and fixtures
($35.8 million); acquisition of software products and debt and
contingency payments relating to past business acquisitions ($13.6
million); and completion of construction of additional office and
dining facilities at the Company's corporate headquarters to
accommodate the Company's continued rapid growth ($2.1 million).
The Company believes that current cash and investment reserves and
cash to be provided by operations will be sufficient to satisfy its
existing and presently anticipated operating and capital resource
needs.

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 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 <23>

Seasonality and Inflation
The Company's operations have not proven to be significantly
seasonal, although quarterly revenues and net income could be
expected to vary at times. This is attributable principally to the
timing of customers entering into license agreements with the
Company and fluctuations in the amount of certain information
services used by customers, principally during holiday seasons and
periods of severe weather. The Company is unable to control the
timing of these decisions or fluctuations.

Although the Company cannot accurately determine the amounts
attributable thereto, the Company has been affected by inflation
through increased costs of employee compensation and other
operating expenses. To the extent permitted by the marketplace for
the Company's products and services, the Company attempts to
recover increases in costs by periodically increasing prices.
Additionally, most of the Company's license agreements and long-
term services agreements provide for annual increases in charges.

PAGE <24>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial
Statements and Supplementary Data

Page

Report of Independent Accountants........................ 25

Consolidated Financial Statements and Notes:

Consolidated Statement of Operations for the years
ended December 31, 1992, 1991 and 1990.............. 26

Consolidated Balance Sheets as of
December 31, 1992 and 1991.......................... 27

Consolidated Statement of Changes in
Stockholders' Equity for the years ended
December 31, 1992, 1991 and 1990.................... 28

Consolidated Statement of Cash Flows for the
years ended December 31, 1992, 1991 and 1990........ 29

Notes to Consolidated Financial Statements............. 30

Quarterly Consolidated Results of
Operations............................................. 44

Supplemental Schedules:

Schedule I - Marketable Securities..................... 46

Schedule V - Property and Equipment.................... 47

Schedule VI - Accumulated Depreciation and
Amortization of Property and Equipment.............. 49

Schedule X - Supplementary Income
Statement Information............................... 51

Supplemental schedules other than those listed above are
omitted because of the absence of conditions under which they are
required or because the required information is included in the
consolidated financial statements or in the notes thereto.

PAGE <25>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Policy Management Systems Corporation

We have audited the accompanying consolidated balance sheet of Policy
Management Systems Corporation and subsidiaries as of December 31, 1992 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.

As further discussed in Note 2 to the consolidated financial statements,
management discovered certain errors in the Company's previously issued
financial statements. Accordingly, the balance sheet and the statements of
operations, changes in stockholders' equity and cash flows for the year ended
December 31, 1992 have been restated to reflect the correction of these errors.

In 1993, lawsuits were filed against the Company and certain of its present
and former officers and directors alleging violation of securities laws as well
as negligent misrepresentation. In addition, the Securities and Exchange
Commission is conducting an investigation into possible violations of Federal
securities laws. These issues are further discussed in Note 5 to the
consolidated financial statements. Management cannot predict the ultimate
impact of these actions on the consolidated financial statements. Accordingly,
no provisions have been made in the consolidated financial statements.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Policy
Management Systems Corporation and subsidiaries as of December 31, 1992, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.

Atlanta, Georgia Coopers & Lybrand L.L.P.
September 6, 1994

PAGE <26>

<TABLE>

POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31,
1992 1991 1990
(Restated) (Restated) (Restated)
(Unaudited)
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Revenues
Licensing............................................$ 73,007 $ 75,988 $ 70,376
Services............................................. 416,254 335,168 271,316
489,261 411,156 341,692
Costs and Expenses
Employee compensation and benefits.................. 168,144 157,249 141,699
Computer and communications expenses................ 39,656 30,717 27,189
Information services and data acquistion costs...... 92,827 79,282 53,731
Other operating costs and expenses.................. 109,663 80,249 67,866
410,290 347,497 290,485

Operating income.................................... 78,971 63,659 51,207

Other Income and Expenses:
Investment income................................. 12,073 11,715 11,047
Gain on sale of marketable securities............. 1,046 1,456 19
Interest expense and other charges................ (1,327) (4,054) (6,844)
11,792 9,117 4,222

Income before income taxes.......................... 90,763 72,776 55,429

Income taxes........................................ 29,241 25,180 18,263

Net income.......................................... $ 61,522 $ 47,596 $ 37,166

Net income per share................................ $ 2.65 $ 2.21 $ 1.92

Fully diluted net income per share.................. - $ 2.14 $ 1.80

<FN>

See accompanying notes.

</TABLE>

PAGE <27>

<TABLE>

POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS

December 31,
1992 1991
(As Restated) (As Restated)
(Unaudited)
(In Thousands, Except Share Data)
<S> <C> <C>
Assets
Current assets:
Cash and equivalents........................................$ 31,959 $ 39,609
Marketable securities....................................... 206,562 157,805
Receivables, net of provisions for uncollectible amounts
of $1,630 ($1,198 at 1991)............................... 86,479 87,398
Income taxes receivable..................................... 2,891 1,117
Deferred income taxes....................................... 8,083 6,981
Other....................................................... 7,939 6,840
Total current assets..................................... 343,913 299,750

Property and equipment........................................ 131,696 117,908
Receivables................................................... 22,252 11,568
Note receivable............................................... - 9,500
Intangibles................................................... 100,792 105,874
Capitalized software costs.................................... 99,414 77,669
Deferred income taxes......................................... 2,580 -
Other......................................................... 6,295 10,423
Total assets..........................................$706,942 $632,692

Liabilities

Current liabilities:
Accounts payable and accrued expenses.......................$ 37,022 $ 51,523
Accrued contract termination costs.......................... 4,008 1,095
Current portion of long-term debt........................... 3,670 3,689
Unearned revenues........................................... 11,500 9,204
Other....................................................... 1,026 1,994
Total current liabilities................................ 57,226 67,505

Long-term debt................................................ 6,001 5,976
Deferred income taxes......................................... 56,112 50,897
Other......................................................... 8,527 8,435
Total liabilities........................................ 127,866 132,813

Commitments and contingencies (Note 4)

Stockholders' Equity

Special stock, $.01 par value, 5,000,000 shares authorized.... - -
Common stock, $.01 par value, 75,000,000 shares authorized,
23,524,197 shares issued and outstanding (23,054,713
at 1991).................................................... 235 231
Additional paid-in capital.................................... 307,906 289,314
Retained earnings............................................. 272,766 211,244
Foreign currency translation adjustment....................... (1,831) -
Unrealized loss on marketable equity securities............... - (910)
Total stockholders' equity............................... 579,076 499,879

Total liabilities and stockholders' equity............$706,942 $632,692

<FN>

See accompanying notes.

</TABLE>

PAGE <28>

<TABLE>

POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Unrealized
Addi- Foreign Loss on
tional Currency Marketable
Common Paid-In Retained Translation Equity
Stock Capital Earnings Adjustment Securities Total
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1989,
as previously reported....... $193 $161,275 $123,601 $ - $ - $285,069
Effect of restatement
attributable to prior years.. - - 2,880 - - 2,880

Balance, December 31, 1989,
as restated (unaudited)...... 193 161,275 126,481 - - 287,949
Net income..................... - - 37,167 - 37,167
Stock options exercised........ 1 3,651 - - - 3,652
New York Stock Exchange
listing expenses............. - (200) - - - (200)
Unrealized loss on
noncurrent marketable
equity securities............ - - - - (1,160) (1,160)
____ ________ ________ ________ ________ _______
Balance, December 31, 1990,
as restated (unaudited)...... 194 164,726 163,648 - (1,160) 327,408
Net income..................... - - 47,596 - - 47,596
Stock issued under incentive
compensation plan............ - 1,522 - - - 1,522
Stock options exercised........ 9 25,270 - - - 25,279
Conversion of convertible
debentures................... 28 97,796 - - - 97,824
Decrease in unrealized loss on
noncurrent marketable equity
securities................... - - - - 250 250
____ ________ ________ ________ ________ _______
Balance, December 31, 1991,
as restated (unaudited)...... 231 289,314 211,244 - (910) 499,879
Net income..................... - - 61,522 - - 61,522
Stock options exercised........ 4 18,592 - - - 18,596
Transfer of marketable
equity securities to
current portfolio............ - - - - 910 910
Foreign currency translation
adjustment................... - - - (1,831) - (1,831)

Balance,December 31, 1992,
as restated.................. $235 $307,906 $272,766 $ (1,831) $ - $579,076

<FN>

See accompanying notes.

</TABLE>

PAGE <29>

<TABLE>

POLICY MANAGEMENT SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,
1992 1991 1990
(Restated) (Restated) (Restated)
(Unaudited) (Unaudited)
(In Thousands)
<S> <C> <C> <C>
Operating Activities
Net income/(loss)..................................... $ 61,522 $47,596 $ 37,167
Adjustments to reconcile net income/(loss) to net
cash provided by operating activities:
Depreciation and amortization...................... 51,104 41,538 40,636
Deferred income taxes.............................. 2,178 6,154 10,138
Gain on sale of marketable securities.............. - (1,456) (33)
Provision for uncollectable accounts............... 712 - -
Changes in assets and liabilites
Receivables........................................ (11,878) (16,632) 6,342
Income taxes receivable............................ (1,774) 3,961 1,056
Accounts payable and accrued expenses.............. (1,108) 6,033 (2,297)
Income taxes payable............................... 160 (17) -
Other, net........................................... 9,765 (3,550) (7,406)
Cash provided by operations..................... 107,831 83,627 85,603

Investing Activities
Increase in marketable securities..................... (48,382) (32,722) (12,852)
Acquisition of property and equipment................. (56,011) (20,664) (37,222)
Capitalized internal software development costs....... (24,344) (28,713) (27,795)
Purchased software.................................... (5,702) (623) (1,461)
Proceeds from disposal of property and equipment...... 4,307 1,705 162
Business acquisitions................................. (2,194) (9,215) (7,111)
Cash used for investing activities............... (127,427) (85,598) (86,279)

Financing Activities
Payments on capital lease obligations................. (467) (1,887) (1,532)
Payments on long-term debt............................ (2,066) (3,169) (2,926)
Issuance of common stock under stock
option plans......................................... 14,692 18,725 3,652
New York Stock Exchange listing expenses.............. - - (200)
Cash provided (used) by financing activities..... 12,159 13,669 (1,006)

Effect of exchange rate changes on cash................. (213) - -
Net increase (decrease) in cash and equivalents......... (7,650) 11,698 (1,682)
Cash and equivalents at beginning of year............... 39,609 27,911 29,593
Cash and equivalents at end of year..................... $ 31,959 $ 39,609 $ 27,911

Noncash Activities
Long-term debt arising from and assumed in
connection with business acquisitions................ $ 2,187 $ 9,918 $ 3,488
Reduction in long-term debt resulting from
conversion of convertible debentures into
common stock......................................... - (99,983) -

Supplemental Information
Interest paid......................................... 958 5,431 6,109
Income taxes paid..................................... 25,126 11,033 9,643

<FN>

See accompanying notes.

</TABLE>

PAGE <30>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The consolidated financial statements are prepared on the
basis of generally accepted accounting principles and include the
accounts of the Company and its subsidiaries, all of which are
wholly-owned. All material intercompany balances and transactions
have been eliminated. Certain amounts previously presented in the
consolidated financial statements for prior periods have been
reclassified to conform to current classifications.

The consolidated balance sheet as of December 31, 1992 and the
related consolidated statements of operations, changes in
stockholders' equity and cash flows for the year then ended have
been audited and are restated herein. The consolidated balance
sheet as of December 31, 1991 and the related consolidated
statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 1991 and 1990 have been
restated by the Company, without audit, to conform to the
adjustments to the Company's retained earnings as of December 31,
1991, as discussed in Note 2. These adjustments include all
adjustments which are, in the opinion of management, necessary to
state fairly the results for the periods presented.

Segment Information
The Company operates in one business segment, the providing of
computer software systems and related automation and administration
support and information services to the insurance industry. No
customer accounted for more than 10% of revenues in 1992, 1991 or
1990.

Revenue Recognition
The Company's revenues are generated primarily by licensing to
customers standardized insurance software systems and providing
automation and administrative support and information services to
the insurance industry.

PAGE <31>

current versions of licensed systems. Under the enhancement
provisions of MESA, the Company will provide any additions or
modifications to the licensed systems, which the Company may
deliver from time to time to licensees of those systems if and when
they become generally available. The monthly license charge is
recognized as revenue on a monthly basis throughout the term of the
MESA provision of the license agreement. Services availability
allows customers access to professional services, other than
maintenance and enhancements, which are provided under separate
arrangements during the MESA term.

The Company provides professional support services, including
systems implementation and integration assistance and consulting
and educational services, which are available under services
agreements and charged for separately. These services are generally
provided under time and material contracts and in some
circumstances under fixed price arrangements. Under fixed price
contracts, revenue is recognized on the basis of the estimated
percentage of completion of service provided using the cost to cost
method. Changes in estimates to complete and losses, if any, are
recognized in the period in which they are determined.

The Company also offers information and outsourcing services
ranging from making available software licensed from the Company on
a remote processing basis from the Company's data centers, to
complete systems management, processing, administrative support and
automated information services through the Company's nationwide
telecommunications network using the Company's database products.
Outsourcing services are typically provided under contracts having
terms from three to ten years. Revenues from substantially all
outsourcing and information services are recognized at the time the
service is performed.

The Company adopted the provisions of the Statement of
Position for "Software Revenue Recognition" of the American
Institute of Certified Public Accountants effective January 1,
1992. Application of these provisions resulted in revenues and
earnings which approximated those of the Company under previous
revenue recognition practices.

Marketable Securities
Interest bearing marketable securities are stated at amortized
cost, which approximates market value. Current marketable equity
securities are stated at the aggregate of lower of cost or market
and a valuation allowance is provided for the excess, if any, of
cost over market. The fair values of marketable securities are
estimated based on quoted market prices for those or similar
investments. Gains or losses on marketable securities are
determined on the specific identification method. Marketable
securities consist of the following:

PAGE <32>
December 31,
1992 1991
(Unaudited)
(In Thousands)
U.S. Government and Agency securities.... $ 9,072 $10,021

Corporate notes.......................... - 1,000

Municipal bonds and notes................ 197,115 46,784

Equity securities........................ 375 -
Total................................ $206,562 $157,805

Investment securities with original maturities of three months
or less at the time of acquisition are considered cash equivalents.

Marketable equity securities held for long-term investment are
included in other noncurrent assets at market value and a reserve
for unrealized gains or losses thereon is included in stockholders'
equity.

Property and Equipment
Property and equipment, including certain equipment acquired
under capital leases, are stated at cost less accumulated
depreciation and amortization. Property and equipment are
depreciated on a straight-line basis over their estimated useful
lives. Assets acquired under capital leases are amortized over the
term of the related lease.

Computer Software
In accordance with Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased or Otherwise Marketed" (FAS 86), certain costs incurred in
the internal development of computer software which is to be
licensed to customers and costs of purchased computer software,
consisting primarily of software acquired through business
acquisitions, are capitalized and amortized at the greater of the
amount computed using (i) the ratio that current gross revenues for
a product bear to the total of current and anticipated future gross
revenues of that product or (ii) the straight-line method over the
remaining estimated economic life of the product including the
period being reported on. Costs which are capitalized as part of
internally developed software primarily include direct and indirect
costs associated with payroll, computer time and allocable
depreciation and other direct allocable costs, among others. All
costs incurred prior to the establishment of technological
feasibility have been expensed as research and development costs
during the periods in which they were incurred and amounted to
$13.3, $10.9 and $2.3 million for the years ended December 31,
1992, 1991, and 1990, respectively.

PAGE <33>

As part of the Company's restatement of its prior years'
retained earnings (see Note 2), additional software costs in the
cumulative amount of $30.5 million ($18.9 million net of tax) were
capitalized as of December 31, 1992 ($28.3 million as of December
31, 1991). A detailed study of all software-related expenditures
dating back to December 15, 1988 indicated significant
misallocation and overexpensing of development costs. This error
relating to under-capitalization of software development costs was
due to certain weaknesses in the Company's then existing cost
accounting and accumulation system which did not capture all
appropriately capitalizable costs as defined in FAS 86. The
additional capitalized costs include both elements of direct and
indirect costs as described above as required by FAS 86. All of
the additional capitalized software costs are related to the
Company's property and casualty business software systems.
Additional development costs relating to the Company's internally
developed Series III life systems were not capitalized because all
the conditions of FAS 86 were not met. No significant software
development costs were capitalized for the Company's health
insurance business.

For all years through December 31, 1992, the Company amortized
internally developed software on a straight-line basis over an
estimated useful life of four years. Amortization charged to
expense was $20.3, $18.4 and $18.7 million for the years ended
December 31, 1992, 1991 and 1990, respectively.

Capitalized software costs are as follows:
December 31,
1992 1991
(Unaudited)
(In Thousands)

Internally developed software............. $ 99,628 $ 91,950
Purchased software........................ 41,014 23,304
140,642 115,254
Less: Accumulated amortization........... (41,228) (37,585)
Capitalized software costs................ $ 99,414 $ 77,669

Income Taxes
In 1992, the Company adopted the provisions of Statement No.
109, "Accounting for Income Taxes", ("Statement 109") of the
Financial Accounting Standards Board. Under Statement 109, the
deferred tax liabilities and assets are determined based on
temporary differences between the bases of certain assets and
liabilities for income tax and financial reporting purposes. These
differences are primarily attributable to differences in the
recognition of depreciation and amortization of property, equipment
and intangible assets and certain software development costs and
revenues. Although this change had no impact on the calculation of

PAGE <34>

the Company's total income tax provision or net deferred income
taxes, the classification of certain deferred income tax
liabilities and assets as either current or noncurrent changed and
consolidated balance sheets for prior periods have been restated to
reflect these changes.

Research and experimentation tax credits are recognized as
reductions in the income tax provision in the year in which they
became available.

Net Income Per Share
Net income per share is based upon the weighted average number
of common shares outstanding. Outstanding stock options are common
stock equivalents, but are excluded from the computation of net
income per share since their dilutive effect is not material.

Fully diluted net income per share is based upon the weighted
average number of common shares plus common stock equivalents
outstanding and gives effect to the assumed conversion of all
outstanding convertible debt until actually converted or redeemed
in May 1991 (see Note 5). Had conversion or redemption occurred on
January 1, 1991, net income per share would have approximated fully
diluted net income per share for 1991.

The weighted average number of shares used in computing income
per share amounts is as follows:

Year Ended December 31,
1992 1991 1990
(Unaudited) (Unaudited)
Net income per share................. 23,236,455 21,567,575 19,364,453
Fully diluted net income per share... - 22,895,007 22,631,642

Foreign Currency Translation
The local currencies of the Company's foreign subsidiaries
have been determined to be the functional currencies. Assets and
liabilities of foreign subsidiaries are translated into United
States dollars at current exchange rates, resulting translation
gains and losses are included as an adjustment to stockholders'
equity. Revenue and expense accounts of these operations are
translated at average exchange rates prevailing during the year.
Transaction gains and losses, which were not material, are included
in the results of operations of the period in which they occur.

NOTE 2. RESTATEMENT OF PRIOR YEARS' RESULTS OF OPERATIONS

In August 1993, the Company engaged independent accountants to
conduct a special audit of the Company's 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

PAGE <35>

accounting principles and subsequent discovery of facts existing at
February 26, 1993, the date of the predecessor auditor's report.

The components, net of related tax effects, of the cumulative
adjustment to retained earnings as of December 31, 1992, are as
follows:
Increase (Decrease) to
Retained Earnings
(In Thousands)
Elimination of revenue related
to a contingent contract that
that was cancelled............... $ (820)
Deferral of revenues due to
changes in timing of revenue
recognition...................... (8,408)
Reduction of expenses due to
capitalization of certain
software costs (see Note 1)...... 18,863
Recognition of expenses due
to changes in timing of
expense accrual.................. (1,622)
Reserve for losses on certain
services contracts............... (5,536)
Reduction of current income tax
liability due to previously
unrecorded tax credits........... 2,580
Cumulative retained earnings
as of December 31, 1992.......... $ 5,057

In February 1994, the Company engaged independent accountants
to audit the Company's consolidated financial statements as of and
for the twelve months ended December 31, 1993 and 1992.

As a result of the 1992 audit, the Company determined the
specific prior period or periods in 1992 affected by the above
adjustments and also determined that retained earnings previously
reported as of December 31, 1991 required adjustment.

The components (net of related tax effects) of the adjustment
to previously reported net income for the years ended December 31,
1992, 1991 and 1990 are as follows:

PAGE <36>

Increase (Decrease) to Net Income
1992 1991 1990
(Unaudited) (Unaudited)
(In Thousands)
Elimination of revenue related
to a contingent contract that
that was cancelled.............$ (820) $ - $ -
Deferral of revenues due to
changes in timing of revenue
recognition.................... (2,331) (1,088) (2,653)
Reduction of expenses due to
capitalization of certain
software costs (see Note 1).... 1,557 4,668 3,594
Recognition of expenses due
to changes in timing of
expense accrual................ 3,365 (364) (833)
Reserve for losses on certain
services contracts............. (2,179) (3,196) (123)
Reduction of current income tax
liability due to previously
unrecorded tax credits......... 2,580 - -
Net income adjustment............ $ 2,172 $ 20 $ (15)

Adjustment per share............. $ .10 $ - $ -

The net income adjustment for the years ended December 31,
1991 and 1990 had no effect on net income per share as previously
reported.

The components, net of related tax effects, of the cumulative
adjustment to retained earnings as of December 31, 1989, are as
follows:
(Unaudited)
Increase (Decrease)
to Retained Earnings
(In Thousands)
Deferral of revenues due to
changes in timing of revenue
recognition...................... $(2,336)
Reduction of expenses due to
capitalization of certain
software costs (see Note 1)...... 9,044
Recognition of expenses due
to changes in timing of
expense accrual.................. (3,791)
Reserve for losses on certain
services contracts............... (37)
Cumulative retained earnings
as of December 31, 1989.......... $ 2,880

PAGE <37>

Deferral of revenues due to changes in timing of revenue
recognition includes situations where (i) there were errors in
accounting for contracts under the percentage of completion method;
(ii) there were delays in receiving signed contracts; (iii)
customers prepaid or were billed for services performed in
subsequent periods or where refunds or provisions for credit were
contractually required and (iv) the Company had future delivery
obligations under certain contracts.

NOTE 3. ACQUISITIONS

Since January 1986, the Company has acquired twenty-nine
businesses. These business acquisitions have assisted the Company
in establishing itself as a leading provider of a full range of
automation, administration support and information solutions to the
entire insurance industry. The aggregate consideration for these
acquisitions was $3,600,000 in 1992 ($5,900,000 in 1991 and
$9,100,000 in 1990) in cash and interest bearing promissory notes,
plus contingent future cash payments for certain acquisitions.

Effective March 31, 1992, the Company acquired the CAPSIL
business and operations of Capsco-Pallm Systems, Inc. ("CAPSCO") of
Indianapolis, Indiana, for an aggregate consideration of $3,600,000
in cash and an interest bearing promissory note. CAPSCO provides
software applications designed for use by life and health insurance
companies.

These business acquisitions have been accounted for under the
purchase method. Accordingly, the results of operations for each
of these acquired businesses are included in the consolidated
statements of income since the effective dates of the respective
acquisitions.

In addition to business acquisitions, the Company has on
occasion acquired data processing facilities and equipment and
related assets and paid a contract acquisition premium in
consideration of customers entering into major, long-term
outsourcing arrangements with the Company.

Intangibles include the excess of the acquisition cost over
the fair value of net assets acquired for acquisitions of
$83,093,000 at December 31, 1992 ($80,322,000 at 1991), which is
being amortized on a straight-line basis over 25 years. The
remainder of intangibles consists of assets, primarily customer
lists and contracts in force, relating to acquisitions of
$48,247,000 at December 31, 1992 ($46,531,000 at 1991), which is
being amortized on a straight-line basis over 2-25 years.
Accumulated amortization related to intangibles was $29,651,000 at
December 31, 1992 ($20,979,000 at 1991).

PAGE <38>

NOTE 4. PROPERTY AND EQUIPMENT

A summary of property and equipment is as follows:

Estimated December 31,
Useful Life 1992 1991
(Unaudited)
(Years) (In Thousands)
Cost:
Land and improvements....................... - $ 2,557 $ 2,557
Buildings................................... 10-40 41,820 41,680
Construction in progress.................... - 15,721 6,277
Leasehold improvements...................... 1-10 3,351 2,718
Office furniture, fixtures and equipment.... 5-15 30,370 27,612
Data processing and communications
equipment................................ 2-5 116,135 108,321
Other....................................... 3-5 5,472 5,095
________ ________
215,426 194,260
Less: Accumulated depreciation
and amortization..................... (83,730) (76,352)
________ ________
Property and equipment....................... $131,696 $117,908

Land includes 145 acres on which the Company's Columbia, South
Carolina, corporate headquarters are located. In mid-1991, the
Company began construction of a 176,000 square foot addition to its
corporate headquarters which was completed in early 1993 at a total
cost of $16,200,000.

Depreciation and amortization charged to expense was
$24,109,000 in 1992 ($17,846,000 in 1991 and $15,534,000 in 1990).

NOTE 5. COMMITMENTS AND CONTINGENCIES

Commitments
The Company occupies leased facilities under various operating
leases expiring through 2014. The leases for certain facilities
contain options for renewal and provide for escalation of annual
rentals based upon increases in the lessors' operating costs. Rent
expense under leases for facilities was $8,675,000 in 1992
($7,533,000 in 1991 and $7,402,000 in 1990).

The Company leases certain data processing and related
equipment under both capital and operating leases expiring through
1995. Rent expense under operating leases for such equipment was
$4,265,000 in 1992 ($965,000 in 1991 and $2,211,000 in 1990).
Future minimum lease obligations under noncancelable operating
leases are as follows:

PAGE <39>
Data
Processing
Facilities Equipment Total
(In Thousands)
Year Ending December 31,
1993............................ $ 7,587 $ 61 $ 7,648
1994............................ 6,533 48 6,581
1995............................ 5,536 21 5,557
1996............................ 4,914 - 4,914
1997............................ 4,348 - 4,348
Thereafter...................... 20,879 - 20,879
_______ ____ _______
Total............................. $49,797 $130 $49,927

Assets acquired under capital leases are capitalized using
interest rates appropriate at the inception of the lease. At
December 31, 1992, the net book value of property and equipment
acquired under capital leases and related future minimum
obligations were not material.

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 is 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 this investigation.

PAGE <40>

NOTE 6. LONG-TERM DEBT

Long-term debt is as follows:
December 31,
1992 1991
(Unaudited)
(In Thousands)
Notes payable, due through October 1995,
interest at 4.51% to 10.00%............... $ 9,671 $ 9,665

Less:Current portion........................ (3,670) (3,689)
_______ _______
Long-term debt............................... $ 6,001 $ 5,976

In May 1991, the Company called for the redemption of all its
$100 million, 5.5% Convertible Subordinated Debentures, originally
due February 1, 2012. The debentures were converted into 2,758,050
shares of common stock at a conversion price of $36.25 per share
and $17,000 was redeemed in cash.

NOTE 7. INCOME TAXES

A reconciliation of the difference between the actual income
tax provision and the expected provision, computed using the
applicable statutory rate, is as follows:

Year Ended December 31,
1992 1991 1990
(Restated) (Restated) (Restated)
(Unaudited) (Unaudited)
Statutory rate.............................. 34% 34% 34%
(In Thousands)
Income tax provision computed at
statutory rate............................ $30,859 $24,744 $18,847
Increase (decrease) in taxes due to:
Research and experimentation credits...... - (159) (1,680)
Nontaxable investment income.............. (3,336) (2,823) (2,541)
State and local income taxes, net of
federal tax benefit..................... 489 2,140 1,658
Other..................................... 1,229 1,278 1,979
_______ _______ _______
Actual income tax provision................. $29,241 $25,180 $18,263

Effective income tax rate................... 32.2% 34.6% 32.9%

PAGE <41>

An analysis of the income tax provision is as follows:

Year Ended December 31,
1992 1991 1990
(Restated) (Restated) (Restated)
(Unaudited) (Unaudited)
(In Thousands)
Current taxes................................ $27,063 $19,023 $ 8,123
Deferred income taxes relating to
temporary differences:
Depreciation and amortization of
property, equipment and intangibles...... (1,907) (345) 2,055
Capitalized internal software development
costs.................................. 4,458 5,107 4,590
Other.................................... (373) 1,395 3,495
2,178 6,157 10,140

Total income tax provision................... $29,241 $25,180 $18,263

An analysis of deferred income taxes is as follows:

December 31,
1992 1991
(Unaudited)
(In Thousands)
Depreciation and amortization of property,
equipment and intangibles......................... $23,726 $22,122
Capitalized internal software development costs...... 28,073 27,153
Software development revenues........................
Other................................................ (6,350) (5,359)
_______ _______
Deferred income taxes................................ $45,449 $43,916

In 1992, the Internal Revenue Service completed its normal
examination of the Company's consolidated federal income tax
returns for the years 1985 through 1988 and has proposed certain
adjustments for those years. The Company believes that its
judgement in the areas for which adjustments have been proposed has
been appropriate and is contesting the proposed adjustments.
Additionally, the Company believes that adequate amounts of federal
income tax have been provided in its consolidated financial
statements for these years.

NOTE 8. EMPLOYEE BENEFIT PLANS

Profit Sharing Retirement Plan
Eligible employees of the Company are covered under the
Company's profit sharing retirement plan. The Company's
contribution to the plan is determined by the Board of Directors of
the Company. Employees make no contributions to this plan. The

PAGE <42>

Company made contributions of $800,000 in early 1993, $720,000 in
early 1992, and $600,000 in early 1991 for the plan years 1992,
1991, and 1990, respectively.

Retirement Savings Plan
The Company offers a 401(k) retirement savings plan for
eligible employees. Participants can elect to have up to 6% of
their salary withheld for investment in the program and the Company
will make a matching contribution of $.50 for each $1.00 of
employee participation. Participants may also make limited
additional contributions which are not subject to matching
contributions by the Company. Participants have several options as
to how their contributions may be invested, but all matching
Company contributions are invested in common stock of the Company.
Except in certain instances, participant contributions are made
from pre-tax wages. The Company's contribution on behalf of
participating employees was $1,900,000 for 1992 ($1,739,000 for
1991 and $1,389,000 for 1990).

Stock Option Plans
The Company has various plans under which options to purchase
shares of the Company's common stock have been or may be granted to
eligible employees and members of the Board of Directors ofthe
Company. All options granted in 1992 are subject to approval by the
Company's stockholders of an amendment to increase the number of
shares available for grant under the 1989 stock option plan by
1,300,000 shares. If approval is obtained, options for a total of
996,939 shares of the Company's common stock will be available for
future grant under these plans.

Option activity is summarized as follows:

Year Ended December 31,
1992 1991 1990
(Unaudited) (Unaudited)
Shares under option at beginning of
year.............................. 1,295,297 1,789,938 1,549,104
Granted.............................. 396,300 390,200 404,100
Exercised............................ (469,483) (823,665) (132,415)
Forfeited............................ (19,258) (61,176) (30,851)
Shares under option at end of year... 1,202,856 1,295,297 1,789,938

Shares under option exercisable
at end of year.................... 443,297 569,759 1,020,338

The option prices of options exercised during 1992, 1991 and
1990 were $15.13 to $49.63. The option prices of shares under
option at December 31, 1992, 1991 and 1990 were $15.13 to $69.38.

PAGE <43>

All options have been granted at 100% of market value at date
of grant and are exercisable at the rate of 33 1/3% per year
(cumulative) beginning one year from date of grant.

NOTE 9. CERTAIN TRANSACTIONS

In August 1989, International Business Machines Corporation
("IBM") acquired directly from the Company a 19.8% interest in the
Company's outstanding voting stock for $116,775,000. IBM is
entitled to increase its ownership interest up to a maximum of 30%
by purchasing the Company's common stock in the open market. IBM's
ownership interest was 16.1% at December 31, 1992. IBM and the
Company work closely together to develop and market automation
solutions for the insurance industry.

Certain officers of the Company, currently numbering eighteen,
participated in the Company's long-term incentive plan for
executives, which began January 1, 1987 and ended December 31,
1992. The plan provided for the payment of pre established bonuses,
payable either in cash, common stock of the Company or a
combination thereof, if certain earnings per share performance
goals were reached by the Company during the six-year life of the
plan. In 1991 and 1989, 36,678 and 73,073 shares of common stock,
respectively, were issued in conjunction with bonuses paid under
this plan, leaving a total of 265,249 shares available for
distribution under this plan at December 31, 1992. Bonuses earned
under the final two year period of the plan ended December 31,
1992, which will be paid in 1993, could result in the issuance of
a maximum of 45,348 shares of common stock.

For several years the Company had been party to several
agreements with Agency Automation Partners Limited ("Partnership"),
a privately placed research and development limited partnership
formed for the purpose of developing and marketing an automated
insurance agency sales and marketing system, Agency Workstation
("AWS"). In December 1992, the Company terminated its relationship
with the Partnership and acquired all ownership rights to AWS for
a cash payment of $1,500,000 and other consideration, including the
release of the Partnership from its obligations under a loan
payable to the Company in the principal amount of $9,500,000.

Pursuant to a stock repurchase program approved by the Board
of Directors in late 1990, the Company may purchase from time to
time on the open market up to 5% (970,668 shares) of its issued and
outstanding common stock. No shares have been repurchased under
this program.

PAGE <44>

<TABLE>

QUARTERLY CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)

First Second Third Fourth
Quarter Quarter Quarter Quarter
(In Thousands, Except Per Share Data)
1992 (Restated)
<S> <C> <C> <C> <C>
Revenues.................................... $117,448 $121,239 $124,086 $126,488
Operating income............................ 17,713 20,222 20,849 20,187
Investment income, net of interest expense.. 2,793 2,840 3,212 2,947
Income before income taxes.................. 20,506 23,062 24,061 23,134
Net income.................................. $ 13,840 $ 15,485 $ 16,143 $ 16,054
Net income per share........................ $ .60 $ .67 $ .69 $ .69

1992 (As Previously Reported)

Revenues.................................... $116,078 $123,119 $126,371 $131,544
Operating income............................ 18,324 19,326 20,147 21,744
Investment income, net of interest expense.. 2,784 2,809 3,215 3,075
Income before income taxes.................. 21,108 22,135 23,362 24,819
Net income.................................. $ 13,715 $ 14,395 $ 15,168 $ 16,072
Net income per share........................ $ .59 $ .62 $ .65 $ .69

1991 (Restated)

Revenues.................................... $ 98,566 $ 97,696 $102,427 $112,467
Operating income............................ 16,283 13,326 16,036 18,014
Investment income, net of interest expense.. 1,232 1,971 2,879 3,035
Income before income taxes.................. 17,515 15,297 18,915 21,049
Net income.................................. $ 11,448 $ 10,083 $ 12,343 $ 13,722
Net income per share........................ $ .59 $ .48 $ .54 $ .60
Fully diluted net income per share.......... $ .54 $ .46 $ .55 $ .58

1991 (As Previously Reported)

Revenues.................................... $ 96,375 $101,619 $105,425 $111,947
Operating income............................ 14,683 15,588 16,242 17,317
Investment income, net of interest expense.. 1,235 1,891 2,845 2,938
Income before income taxes.................. 15,918 17,479 19,087 20,255
Net income.................................. $ 10,460 $ 11,434 $ 12,450 $ 13,232
Net income per share........................ $ .54 $ .54 $ .55 $ .58
Fully diluted net income per share.......... $ .49 $ .52 $ .55 $ .58

<FN>

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

</TABLE>

PAGE <45>

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. In
February 1994, the Company engaged independent accountants to audit
the Company's consolidated financial statements as of and for the
twelve months ended December 31, 1993 and 1992. The Company has
determined the specific prior periods affected by these adjustments
and has restated its financial statements for such periods (see
Note 2 of Notes to Consolidated Financial Statements).

PAGE <46>

SCHEDULE I

POLICY MANAGEMENT SYSTEMS CORPORATION

MARKETABLE SECURITIES

December 31, 1992

Maturity Amortized Market Book
Description Value Cost Value Value
(In Thousands)

5.29% - 9.50% U.S. Government and
Agency securities, maturing on
various dates through October
1994............................. $ 9,000 $ 9,072 $ 9,116 $ 9,072
2.94% - 11.0% Municipal bonds
and notes, maturing on various
dates through January 1998
(all rated A or better).......... 188,385 197,115 198,843 197,115
200,000 shares, The Seibels Bruce
Group, Inc. common stock,
par value $1 per share........... - - 375 375

$197,385 $206,187 $208,334 $206,562

PAGE <47>

SCHEDULE V

POLICY MANAGEMENT SYSTEMS CORPORATION

PROPERTY AND EQUIPMENT
(RESTATED)
(UNAUDITED)

Balance Addi-
At tions Other Balance
Beginning At Retire- Changes At End
Of Year Cost ments (1) Of Year
(In Thousands)

Year ended
December 31, 1990:

Land and improvements...... $ 2,557 $ - $ - $ - $ 2,557
Buildings ................. 31,052 422 (231) 9,721 40,964
Construction in progress... 858 8,970 - (9,718) 110
Leasehold improvements..... 1,846 404 - 421 2,671
Office furniture,
fixtures and equipment... 19,241 5,361 (20) 816 25,398
Data processing and
communications equipment
and support software..... 66,319 21,007 (353) 1,280 88,253
Other...................... 5,371 420 (180) (234) 5,377
$127,244 $36,584 $ (784) $2,286 $165,330

Year ended
December 31, 1991:

Land and improvements...... $ 2,557 $ - $ - $ - $ 2,557
Buildings.................. 40,964 720 (3) (1) 41,680
Construction in progress... 110 6,167 - - 6,277
Leasehold improvements..... 2,671 47 - - 2,718
Office furniture,
fixtures and equipment... 25,398 2,331 (97) (20) 27,612
Data processing and
communications equipment
and support software..... 88,253 26,147 (10,143) 4,064 108,321
Other...................... 5,377 153 (557) 122 5,095
$165,330 $35,565 $(10,800) $4,165 $194,260

Note

(1)Includes assets acquired through business acquisitions, foreign currency
translation adjustments, transfers and other adjustments.

PAGE <48>

SCHEDULE V

POLICY MANAGEMENT SYSTEMS CORPORATION

PROPERTY AND EQUIPMENT
(RESTATED)

Balance Addi-
At tions Other Balance
Beginning At Retire- Changes At End
of Year Cost ments (1) of Year
(In Thousands)

Year ended
December 31, 1992:

Land and improvements...... $ 2,557 $ - $ - $ - $ 2,557
Buildings.................. 41,680 157 - (17) 41,820
Construction in progress... 6,277 9,444 - - 15,721
Leasehold improvements..... 2,718 1,012 (542) 163 3,351
Office furniture,
fixtures and equipment... 27,612 2,451 (558) 865 30,370
Data processing and
communications equipment
and support software..... 108,321 27,146 (18,225) (1,107) 116,135
Other...................... 5,095 1,901 (1,513) (11) 5,472
$194,260 $42,111 $(20,838) $ (107) $215,426

Note

(1)Includes assets acquired through business acquisitions, foreign currency
translation adjustments, transfers and other adjustments.

PAGE <49>
SCHEDULE VI

POLICY MANAGEMENT SYSTEMS CORPORATION

ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
(RESTATED)
(UNAUDITED)

Balance Addi-
At tions Other Balance
Beginning To Retire- Changes At End
Of Year Expense ments (1) Of Year
(In Thousands)

Year ended
December 31, 1990:

Buildings.................. $ 4,545 $ 914 $ (231) $ - $ 5,228
Leasehold improvements..... 1,043 311 - - 1,354
Office furniture,
fixtures and equipment... 9,072 2,033 (20) 2 11,087
Data processing and
communications equipment
and support software..... 34,390 11,606 (290) 232 45,938
Other...................... 3,976 712 (114) (276) 4,298
$53,026 $15,576 $ (655) $ (42) $67,905

Year ended
December 31, 1991:

Buildings.................. $ 5,228 $ 1,189 $ (3) $ - $ 6,414
Leasehold improvements..... 1,354 450 - 39 1,843
Office furniture,
fixtures and equipment... 11,087 2,274 (10) (249) 13,102
Data processing and
communications equipment
and support software..... 45,938 13,443 (8,657) 12 50,736
Other...................... 4,298 491 (538) 6 4,257
$67,905 $17,847 $(9,208) $(192) $76,352

Note

(1)Includes foreign currency translation adjustments, transfers and other
adjustments.

PAGE <50>

SCHEDULE VI

POLICY MANAGEMENT SYSTEMS CORPORATION

ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
(RESTATED)

Balance Addi-
At tions Other Balance
Beginning To Retire- Changes At End
of Year Expense ments (1) of Year
(In Thousands)

Year ended
December 31, 1992:

Buildings.................. $ 6,414 $ 1,203 $ - $ - $ 7,617
Leasehold improvements..... 1,843 495 (506) (8) 1,824
Office furniture,
fixtures and equipment... 13,102 2,590 (528) 269 15,433
Data processing and
communications equipment
and support software..... 50,736 19,346 (14,270) (396) 55,416
Other...................... 4,257 475 (1,289) (3) 3,440
$76,352 $24,109 $(16,593) $(138) $83,730

Note

(1)Includes foreign currency translation adjustments, transfers and other
adjustments.

PAGE <51>

SCHEDULE X

POLICY MANAGEMENT SYSTEMS CORPORATION

SUPPLEMENTARY INCOME STATEMENT INFORMATION

Year ended December 31,
1992 1991 1990
(Restated) (Restated)
(Restated) (Unaudited) (Unaudited)
(In Thousands)
Amortization of intangible assets:
Computer software......................... $22,068 $19,225 $19,990
Intangible assets from business
acquisitions............................ 8,527 7,137 5,448

Maintenance and repairs..................... 8,558 4,646 4,311
$39,153 $31,008 $29,749

PAGE <52>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

On January 19, 1993, the Board of Directors, acting on the
Audit Committee's recommendation, engaged the accounting firm of
Arthur Andersen & Co. to audit the Company's financial statements
for the year ended December 31, 1992, replacing the firm of Ernst
& Young, which was the principal independent auditor for the
Company's two most recent years and subsequent interim period.
Ernst & Young's report on the financial statements for the years
ended December 31, 1990 and 1991 contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles. For the two
years ended December 31, 1991 and in the subsequent interim period,
there have been no disagreements between Ernst & Young and the
Company on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which if not resolved to the satisfaction of Ernst & Young would
have caused Ernst & Young to make reference to the matter in its
report.

PAGE <53>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information other than the listing of Executive Officers of
the Company, which is set forth in Part I of this Form 10-K, is
contained under the heading "Election of Directors" in the
Company's 1993 Proxy Statement and is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

The section of the Company's 1993 Proxy Statement titled
"Compensation Plans and Arrangements" is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The sections of the Company's 1993 Proxy Statement titled
"Principal Stockholders" and "Election of Directors" are
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The section of the Company's 1993 Proxy Statement titled
"Certain Transactions" is incorporated herein by reference.

PAGE <54>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K

Financial Statements and Schedules

See Index to Consolidated Financial Statements and
Supplementary Data on page 24.

Exhibits Filed

Exhibits required to be filed with this Annual Report on
Form 10-K or which have been incorporated herein by reference are
listed in the following Exhibit Index. The 1992 Annual Report to
stockholders and 1993 Proxy Statement shall be deemed to have been
filed only to the extent portions thereof are expressly
incorporated herein by reference.

Pursuant to Rule 15d-21 promulgated under the Securities
Exchange Act of 1934, the following annual report for the Company's
employee stock purchase plan will be furnished to the Commission
when the information becomes available:

Form 11-K for the Company's 401(k) Retirement Savings Plan for
the year ended December 31, 1992 is incorporated herein by
reference.

Form 8-K

The Company did not file any reports on Form 8-K during the
year ended December 31, 1992.

PAGE <55>
REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
Policy Management Systems Corporation

Our report, which includes two emphasis paragraphs discussing
errors in previously issued financial statements and litigation and
a Securities and Exchange Commission investigation, on the
consolidated financial statements of Policy Management Systems
Corporation and subsidiaries is included on page 25 of this Form
10-K. In connection with our audits of such financial statements,
we have also audited the related 1992 financial statement schedules
on pages 46, 48, 50 and 51 of this Form 10-K.

In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material
respects, the information required to be included therein.

Atlanta, Georgia Coopers & Lybrand L.L.P.
September 6, 1994

PAGE <56>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

(REGISTRANT) POLICY MANAGEMENT SYSTEMS CORPORATION

BY (SIGNATURE) /s/ Timothy V. Williams
Timothy V. Williams, Executive Vice
President, Chief Financial Officer
DATE November 16, 1994

BY (SIGNATURE) /s/ Stan F. Stoudenmire
Stan F. Stoudenmire, Vice President
and Corporate Controller
DATE November 16, 1994

Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.

BY (SIGNATURE) /s/ G. Larry Wilson
(NAME AND TITLE) G. Larry Wilson, Chairman of the Board of
Directors, President and Chief Executive
Officer
DATE November 16, 1994

BY (SIGNATURE) /s/ Roy L. Faulks
(NAME AND TITLE) Roy L. Faulks, Vice Chairman of the
Board of Directors
DATE November 16, 1994

BY (SIGNATURE) /s/ John P. Seibels
(NAME AND TITLE) John P. Seibels, Director
DATE November 16, 1994

BY (SIGNATURE) /s/ Frederick B. Karl
(NAME AND TITLE) Frederick B. Karl, Director
DATE November 16, 1994

BY (SIGNATURE) /s/ Richard G. Trub
(NAME AND TITLE) Richard G. Trub, Director
DATE November 16, 1994

PAGE <57>

SIGNATURES

BY (SIGNATURE) /s/ Joseph D. Sargent
(NAME AND TITLE) Joseph D. Sargent, Director
DATE November 16, 1994

BY (SIGNATURE) /s/ Dr. John M. Palms
(NAME AND TITLE) Dr. John M. Palms, Director
DATE November 16, 1994

BY (SIGNATURE) Did not sign.
(NAME AND TITLE) Joseph M. Henson, Director
DATE November 16, 1994

BY (SIGNATURE) Did not sign.
(NAME AND TITLE) Steven A. Denning, Director
DATE November 16, 1994

PAGE <1>

POLICY MANAGEMENT SYSTEMS CORPORATION

EXHIBIT INDEX

Exhibit
Number

3. ARTICLES OF INCORPORATION AND BY-LAWS

A. Articles of Incorporation, as amended, of the
Company (Filed as Exhibit 3(a) to Form 10-K for the year
ended December 31, 1983 - File No. 0-10175)

B. Certified copy of the By-Laws of the Company, as amended
(Filed as Exhibit 3(b) to Registration Statement
No. 2-79410, dated October 5, 1982)

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

A. Specimen forms of certificates for Common Stock of the
Company (Filed as Exhibit 4(a) to Registration Statement
No. 2-74821, dated December 16, 1981)

B. Articles of Amendment to the Articles of Incorporation
of Policy Management Systems Corporation; dated August 23,
1989 (File No. 0-10175 - Filed under cover of Form SE
filed on September 22, 1989)

10. MATERIAL CONTRACTS

A. Form of Standard Licensing Agreement (Filed as Exhibit
10(a) to Form 10-K for the year ended December 31, 1984
- File No. 0-10175)

B. Agreement for the Transfer of Assets for Stock between
Seibels, Bruce & Company and Policy Management Systems
Corporation dated September 30, 1981 (Filed as Exhibit
10(b) to Registration Statement No. 2-74821, dated
December 16, 1981)

C. Employment Agreements, with amendments, between the
Company and five principal officers of the Company
(Filed as Exhibit 10(d) to Registration Statement
No. 2-74821, dated December 16, 1981)

D. Agreement for Data Processing Services between Seibels,
Bruce & Company and the Company effective October 1,
1981, as amended (Filed as Exhibit 10(f) to Form 10-K
for the year ended December 31, 1983 - File No. 0-10175)

PAGE <2>

Exhibit
Number

E. Form of Tax Allocation Agreement among the Company,
Seibels, Bruce & Company, The Seibels Bruce Group, Inc.
and all other affiliated companies (Filed as Exhibit
10(g) to Registration Statement No. 2-74821, dated
December 16, 1981)

F. Stock Purchase Agreements dated August 28, 1981,
between the Company and five principal officers (Filed
Exhibit 10(h) to Registration Statement No. 2-74821,
dated December 16, 1981)

G. Shareholder Agreements dated August 28, 1981, between
the Company and its five principal officers (Filed as
Exhibit 10(i) to Registration Statement No. 2-74821,
dated December 16, 1981)

H. 1983 Amendments to the 1981 Policy Management Systems
Corporation Incentive Stock Option Plan (The 1981 Policy
Management Systems Corporation Incentive Stock Option Plan
as amended prior to 1983 is incorporated by reference from
the Company's Registration Statement on Form S-1 dated
December 16, 1981, No. 2-74821.) (Filed as Exhibit 10(n)
to Form 10-K for the year ended December 31, 1983 - File
No. 0-10175)

I. The Policy Management Systems Corporation Stock Purchase
Savings Plan for Employees (Filed as Exhibit 10(g) to
Registration Statement No. 2-81844, dated February 11,
1983)

J. Policy Management Systems Corporation 1984 Stock Option
Plan (Filed as Exhibit 10(t) to Registration Statement No.
2-93715, dated October 31, 1984)

K. Development Agreement, dated October 24, 1983, between
Agency Automation Partners Limited ("Partnership") and the
Company; Technology License Agreement, dated October 24,
1983, between Partnership and the Company; First Amendment
to Technology License Agreement, dated December 14, 1983,
between Partnership and the Company; Lease and Marketing
Agreement, dated October 24, 1983, between Partnership and
the Company; Purchase Option Agreement, dated October 24,
1983, between Partnership and the Company; Subdevelopment
and Submarketing Agreement, dated October 24, 1983, among
the Company, Shamrock Automation Systems, Inc. and the
Florida Association of Insurance Agents, Inc. (Filed as
Exhibit 10(u) to Registration Statement No. 2-93715, dated
October 31, 1984)

PAGE <3>

Exhibit
Number

L. Policy Management Systems Corporation Employee Stock
Ownership Plan (Filed as Exhibit 10(w) to Form 10-K for
the year ended December 31, 1985 - File No. 0-10175)

M. Policy Management Systems Corporation Profit Sharing Plan
(Filed as Exhibit 10(x) to Form 10-K for the year ended
December 31, 1985 - File No. 0-10175)

N. Policy Management Systems Corporation 1985 Stock Option
Plan (Filed as Exhibit 10(y) to Form 10-K for the year
ended December 31, 1985 - File No. 0-10175)

O. Policy Management Systems Corporation 1985 Employee Stock
Purchase Plan (Filed as Exhibit 10(z) to Form 10-K for the
year ended December 31, 1985 - File No. 0-10175)

P. Modification and Enhancement Agreement, dated August 8,
1985, between Agency Automation Partners Limited
("Partnership") and the Company; Submodification and The
Florida Association of Insurance Agents, Inc.; First
Amendment to Purchase Option Agreement, dated August 8,
1985, among the Partnership, the Company and SASI; First
Amendment to Lease and Marketing Agreement, dated August
8, 1985, between the Partnership and the Company; Second
Amendment to Technology License Agreement, dated August 8,
1985, between the Partnership and the Company (Filed as
Exhibit 10(dd) to Form 10-K for the year ended December
31, 1985 - File No. 0-10175)

Q. Acquisition Agreement between the Company and Commercial
Services, Inc. (Filed as Exhibit 10(bb) to form 10-K for
the year ended December 31, 1985 - File No. 0-10175)

R. Complementary Marketing Assistance Agreement between IBM
and the Company (Filed as Exhibit 10(cc) to
Registration Statement No. 33-11854, dated February 19,
1987)

S. Policy Management Systems Corporation Long-Term Incentive
Plan for Executives (Filed as Exhibit 10(dd) to
Registration Statement No. 33-11854, dated February 19,
1987)

T. Policy Management Systems Corporation 1986 Stock Option
Plan (Filed as Exhibit 10(ee) to Form 10-K for the year
ended December 31, 1986 - File No. 0-10175)

PAGE <4>

Exhibit
Number

U. Policy Management Systems Corporation Long-Term Incentive
Plan for Executives (Filed as Exhibit 10(ff) to
Registration Statement No. 33-26499, dated January 9,
1989)

V. Conformed copy of Stock Purchase Agreement between
International Business Machines Corporation and Policy
Management Systems Corporation, dated July 26, 1989
(File No. 0-10175 - Filed under cover of Form SE filed
on September 22, 1989)

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

X. Conformed copy of Acquisition Agreement between Policy
Management Systems Corporation, Advanced System
Applications, Inc. and John W. Blaney, dated November 13,
1989 (File No. 0-10175 - Filed under cover of Form SE on
November 28, 1989)

Y. Policy Management Systems Corporation 1989 Stock Option
Plan (File No. 0-10175 - Filed under cover of Form SE on
March 22, 1991)

Z. Policy Management Systems Corporation 401(k) Retirement
Plan ( File No. 0-10175 - Filed under cover of Form SE on
March 22, 1991)

11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Filed herewith)

13. ANNUAL REPORT TO SECURITY HOLDERS, FORM 10-Q OR QUARTERLY
REPORT TO SECURITY HOLDERS

1992 Annual Report to Stockholders
(Filed under cover of Form SE on March 19, 1993)

22. SUBSIDIARIES OF THE REGISTRANT
(Filed herewith)

PAGE <1>

EXHIBIT 11

COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(RESTATED)
(UNAUDITED)

Year Ended December 31

1991 1990

Net Income:
Net income as reported.................... $47,596,000 $37,166,000
Interest and amortization on
convertible debt (net of income taxes).. 1,334,317 3,445,620
Adjusted net income................... $48,930,317 $40,611,620

Shares:
Weighted average number of common
shares outstanding...................... 21,567,575 19,364,453
Common stock equivalents
(stock options)......................... 242,691 508,568
From assumed conversion of
convertible debt........................ 1,084,740 2,758,621
Fully diluted shares.................. 22,895,006 22,631,642

Fully diluted net income per share.......... $ 2.14 $ 1.80

PAGE <1>

EXHIBIT 22

LIST OF SUBSIDIARIES
OF POLICY MANAGEMENT SYSTEMS CORPORATION

Policy Management Systems Canada, Ltd.

Policy Management Systems International, Ltd.

Policy Management Corporation

Policy Management Systems Netherlands B.V.

Policy Management Systems Barbados, Ltd.

Policy Management Systems Europe, Limited

P.M.S., Inc.

Policy Management Systems Australia Pty. Limited

Policy Management Systems Information and Administration
Services, Inc.

Portsmouth I.T. Services Limited

Policy Management Systems Germany

Policy Management Systems Life, Inc.