POLICY MANAGEMENT SYSTEMS CORPORATION
POST OFFICE BOX TEN
COLUMBIA, SOUTH CAROLINA 29202

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1996

TO THE STOCKHOLDERS OF
POLICY MANAGEMENT SYSTEMS CORPORATION:

NOTICE IS HEREBY GIVEN to the stockholders that the Annual Meeting of
Stockholders ("Meeting") of Policy Management Systems Corporation ("Company")
will be held at the offices of the Company at One PMS Center, Blythewood,
South Carolina, at 11:00 a.m., on May 28, 1996, for the following purposes:

(1) To elect two Directors of the Company to hold office for a term of three
years and until their successors shall be duly elected and qualified or until
their earlier resignation, removal from office, or death;

(2) To consider and act upon the ratification of the selection of Coopers &
Lybrand L.L.P., as independent auditors for 1996; and

(3) To take such other action and transact such other business which may
properly and lawfully come before the Meeting or any adjournment thereof;
all as set forth in the Proxy Statement accompanying this Notice.

The transfer books of the Company were closed as of the end of business on
March 19, 1996, the record date, for purposes of determining stockholders
entitled to notice of and to vote at the Meeting, but were not closed for any
other purpose.

STOCKHOLDERS ARE URGED TO COMPLETE AND EXECUTE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED WHEN MAILED IN THE
UNITED STATES. YOUR ATTENDANCE AT THE MEETING IS URGED. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND EXECUTE THE ENCLOSED PROXY.
IF YOU ATTEND THE MEETING AND DECIDE THAT YOU WANT TO VOTE IN PERSON, YOU MAY
REVOKE YOUR PROXY. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE NOMINEES FOR DIRECTORS AND RATIFICATION OF THE SELECTION OF COOPERS &
LYBRAND AS INDEPENDENT AUDITORS FOR 1996.

By Order of the Board of Directors

Stephen G. Morrison
Secretary

April 29, 1996

POLICY MANAGEMENT SYSTEMS CORPORATION
POST OFFICE BOX TEN
COLUMBIA, SOUTH CAROLINA 29202

PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1996

GENERAL: This Proxy Statement is furnished to the holders of the $.01 par
value common stock ("Stockholders" and "Common Stock," respectively) of Policy
Management Systems Corporation ("Company") in connection with the solicitation
of proxies by the Board of Directors of the Company to be voted at its Annual
Meeting of Stockholders ("Meeting") to be held at the offices of the Company,
One PMS Center, Blythewood, South Carolina, on Tuesday, May 28, 1996 at 11:00
a.m. It is anticipated that this Proxy Statement will be mailed to
Stockholders on or about May 4, 1996.

A proxy card is enclosed. Any Stockholder sending the enclosed proxy to the
Company has the power to revoke it at any time before it is exercised by: (1)
executing and delivering a valid proxy bearing a later date; (2) delivering
written notice of revocation to Stephen G. Morrison, Secretary, Policy
Management Systems Corporation, Post Office Box Ten, Columbia, South Carolina
29202; or (3) appearing at the Meeting and voting in person. When proxies in
the accompanying form are returned properly executed, the shares represented
by proxies which have not been revoked will be voted according to the
instructions noted thereon.

Unless otherwise specified, the proxies will be voted in favor of the two
nominees for election to the Board of Directors for a term of three years and
in favor of the ratification of the selection of Coopers & Lybrand L.L.P.
("Coopers & Lybrand") as independent auditors. The Board of Directors is not
aware at this date of any other matters that will come before the Meeting.
If, however, any other matters should properly come before the Meeting, it is
the intention of the persons named in the proxy to vote thereon in accordance
with their judgment.

EXPENSES OF SOLICITATION: The cost of soliciting proxies will be borne by the
Company. Officers, Directors and employees of the Company may solicit proxies
by telephone, telegram or personal interview. The Company has entered into an
agreement with D.F. King & Company, Inc. to assist with solicitation of
proxies for the Meeting for a fee estimated at $6,000 plus expenses.

VOTING: Only holders of record of outstanding shares of Common Stock as of
the close of business on March 19, 1996, ("Record Date") will be entitled to
notice of and to vote at the Meeting. Each share is entitled to one vote. On
the Record Date, there were 19,489,871 shares of Common Stock outstanding. A
majority of the outstanding shares of Common Stock present in person or
represented by proxy will constitute a quorum of the Meeting. Abstentions and
broker non-votes are counted as being present for purposes of attaining a
quorum. The Company's Articles of Incorporation ("Articles") provide that the
vote of the holders of a majority of the shares having voting power, present
in person or represented by proxy, shall decide questions before the Meeting,
unless the question is one which by express provision of applicable law, the
Articles or the Bylaws of the Company, a higher vote is required in which case
the express provision shall govern. As such, abstaining shares are included
in the determination of the total number of shares having voting power, and
therefore, have the same effect as no votes on proposals. Broker non-votes
are not considered as shares having voting power

and are therefore not counted as votes cast on such proposals nor are they
counted as votes for or against such proposals. Broker non-votes occur when a
nominee holding shares for a beneficial owner votes on at least one proposal
but does not have authority to vote on certain other proposals. Because the
matters to be voted on at the Meeting are "routine" items as defined by
applicable rules, it is expected that there will not be any broker non-votes
at the Meeting.

In the election of Directors, each Stockholder has the right to cumulate its
votes and cast as many votes as the number of shares held multiplied by the
number of Directors to be elected for the specified term, the same to be cast
for any one nominee or distributed among the nominees for election for the
specified term. To exercise the right of cumulative voting a Stockholder must
declare the intent to do so prior to the beginning of voting and, once having
done so, all Stockholders shall automatically have the right to cumulate their
votes without any further notice. In the event of cumulative voting, the
persons appointed proxies shall have authority to cast the votes represented
thereby for one nominee of the Board of Directors or distribute such votes
among the nominees of the Board of Directors to maximize the number of Board
of Directors' nominees elected. The two nominees receiving the largest number
of votes shall be elected to the three-year term. The ratification of the
selection of independent auditors shall be decided by the vote of the holders
of a majority of the shares having voting power, present in person or
represented by proxy.

PRINCIPAL STOCKHOLDERS: The following table sets forth certain information
based on Schedules 13D and 13G filed with the Securities and Exchange
Commission, as of the Record Date, regarding beneficial owners of more than
five percent of the Company's Common Stock, except for information relating to
GAP Coinvestment Partners, L.P. and General Atlantic Partners 14 L.P., which
sold their holdings of Common Stock on April 8, 1996 (see "Certain
Transactions") and for information relating to The Capital Group Companies,
Inc., which is based on a Schedule 13G dated April 9, 1996.

PRINCIPAL STOCKHOLDERS
Name Common Stock Percentage
and Address Beneficially Owned of Class (1)
Wellington Management Company 2,793,994 (2) 14.0%
("Wellington")
75 State Street
Boston, Massachusetts 02109

The Capital Group Companies, Inc. 1,963,700 (3) 10.1%
("Capital")
333 South Hope Street
Los Angeles, California 90071

Government of Singapore Investment 1,422,800 (4) 7.3%
Corporation Pte Ltd. ("Singapore")
250 North Bridge Road
#33-00 Raffles City Tower
Singapore 0617

The Regents of the University 1,353,200 (5) 6.9%
of California ("Regents")
300 Lakeside Drive
Office of the Treasurer
Oakland, California 94612

Name Common Stock Percentage
and Address Beneficially Owned of Class (1)

American Express Company 988,650 (6) 5.1%
("American Express")
American Express Tower
Wood Financial Center
New York, New York 10205

(1) Determined using the number of shares of Common Stock outstanding on the
Record Date.

(2) Of the shares reported, Wellington has sole voting power for none of the
shares, shared voting power for 1,185,646 of the shares and shared
dispositive power for all of the shares.

(3) Of the shares reported, Capital has sole voting power for 784,000 of the
shares, shared voting power for none of the shares, and sole dispositive
power for all of the shares.

(4) Of the shares reported, Singapore has shared voting and dispositive
power for all of the shares.

(5) Of the shares reported, Regents has sole voting and dispositive power
for all of the shares.

(6) Of the shares reported, American Express has shared voting and
dispositive power for all of the shares.

ELECTION OF DIRECTORS

(PROXY ITEM NO.1): Stockholders will vote on the election of two Directors
each to serve a term of three years and until their successors have been
elected and qualified or until their earlier resignation, removal from office,
or death. Both nominees are currently members of the Board of Directors.

The shares represented by the proxies solicited hereby will be voted in favor
of the election of the persons named below unless authorization to do so is
withheld by proxy. In the event any of the nominees should be unable to serve
as Director, it is the intention of the persons named in the proxies to cast
the votes represented by the proxies for the election of such other person or
persons as the Board of Directors may nominate.

Nominees for election to the Board of Directors are considered and recommended
by the Nominating Committee of the Board of Directors (see "Committees of the
Board of Directors"). The Board of Directors considers the recommendations of
the Committee and recommends the nominees to the Stockholders. Dr. Palms is
nominated to a three year term, notwithstanding the fact that his current term
would not have otherwise expired until 1998, in order to comply with the
requirement that the three classes of the Board of Directors be as equal in
number as possible. The re-classification is a result of Steven A. Denning
and Joe M. Henson resigning from the Board of Directors on April 8, 1996.
After these resignations, the Board of Directors reset the number of Directors
at seven. The Company has no formal procedure whereby nominations are
solicited from Stockholders.

The following information is set forth with respect to the two nominees for
Director to be elected at the Meeting:

Principal Occupation for Past Five Years and
Name and Age Certain Other Directorships

Dr. John M. Palms (60) Director of the Company since 1992; President of the
University of South Carolina since March, 1991; prior thereto President of
Georgia State University; Director of Peco Energy, Inc., Philadelphia,
Pennsylvania; Director of Fortis Holding, Inc., New York, New York; Director
of NationsBank, N.A. (Carolinas), Columbia, South Carolina; Trustee, Institute
of Defense Analysis, Alexandria, Virginia.

John P. Seibels (54) Director of the Company since 1981; Investor,
Columbia, South Carolina; Director of The Seibels Bruce Group, Inc.
("Seibels") and certain subsidiaries.

DIRECTORS WHOSE TERMS WILL EXPIRE IN 1997:

Roy L. Faulks (70) Vice Chairman of the Board of the Company since 1981;
prior to retirement in April, 1986, Executive Vice President and Treasurer of
Seibels and certain subsidiaries.

Frederick B. Karl (72) Director of the Company since 1981; President and
Chief Executive Officer of Tampa General Healthcare since October, 1994; prior
thereto, Chief Executive Officer of Hillsborough County, Florida since 1990;
prior thereto, Senior Partner of Karl, McConnaughhay, Roland and Maida, P.A.,
a law firm in Tallahassee, Florida from 1978 through 1990; Justice of the
Florida Supreme Court from 1977 to 1978.

Richard G. Trub (65) Director of the Company since 1981; Chairman and
Treasurer of Trubco, Inc., West Simsbury, Connecticut, since June, 1992; prior
thereto, Senior Vice President of Connecticut National Bank, Hartford,
Connecticut.

DIRECTORS WHOSE TERMS WILL EXPIRE IN 1998:

Joseph D. Sargent (66) Director of the Company since 1986; Chairman,
Treasurer and Chief Financial Officer of Connecticut Surety Corporation;
Chairman of the Board of S-K-I Limited, Killington, Vermont; Director of
Trenwick Group, Inc., Stamford, Connecticut; Director of Mutual Risk
Management Ltd., Hamilton, Bermuda; Director of EW Blanch Holdings, Inc.,
Minneapolis, Minnesota; Director of Executive Risk Inc., Simsbury,
Connecticut; Director of MMI Companies, Inc., Deerfield, Illinois.

G. Larry Wilson (49) Director of the Company since 1981; Chairman of the
Board, President and Chief Executive Officer of the Company. Employed by the
Company since its inception.

The Board of Directors recommends that the Stockholders vote FOR the nominees
named above.

COMMITTEES OF THE BOARD OF DIRECTORS: Among the standing committees of the
Board of Directors are the Audit, Compensation and Nominating Committees.

The AUDIT COMMITTEE is composed of Messrs. Trub (Chairman), Karl, Sargent and
Seibels. The Committee's functions include recommending independent auditors
to be employed by the Company. The Committee also reviews with the
independent and internal auditors their planned activities, audits and
findings and reports to the Board of Directors. The Audit Committee met nine
times during 1995.

The COMPENSATION COMMITTEE during 1995 was composed of Messrs. Denning
(Chairman), Henson, Karl and Sargent. (Messrs. Denning and Henson resigned
from the Board, effective April 8, 1996.) The Committee's functions include
reviewing and recommending remuneration arrangements for senior officers and
members of the Board of Directors, adopting compensation plans in which
employees, officers and Directors are eligible to participate and approving
compensation guidelines for employees of the Company. The Compensation
Committee met seven times during 1995.

The NOMINATING COMMITTEE during 1995 was composed of Messrs. Seibels
(Chairman), Henson, Palms and Wilson. The Committee's functions include
selecting and recommending nominees for election as new, additional and
replacement Directors and officers and reviewing the performance of incumbent
Directors and officers as to whether to nominate them for re-election. The
Nominating Committee will consider candidates for the Board recommended by
Stockholders if such recommendations are delivered to the Company no later
than: (a) with respect to an election to be held at an annual meeting of
Stockholders, ninety days in advance of such meeting; and (b) with respect to
an election to be held at a special meeting of Stockholders for the election
of Directors, the close of business on the seventh day following the date on
which notice of such meeting is first given. Each such recommendation shall
set forth: (a) the name and address of the Stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the Stockholder is a holder of record of stock of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the recommendation; (c)
a description of all arrangements or understandings between the Stockholder
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
Stockholder; (d) such other information regarding each nominee proposed by
such Stockholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission,
had the nominee been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a Director of the
Company if so elected. The Nominating Committee met once during 1995.

The Board of Directors met eleven times during 1995 and all of the Directors
attended at least 75% of the aggregate of all meetings of the Board and all
Committees of which they were members during 1995.

STOCK OWNERSHIP OF DIRECTORS AND OFFICERS: The following table sets forth as
of February 14, 1996 beneficial ownership of Common Stock by each Director,
each of the executive officers named in the Summary Compensation Table below,
and by all Directors and all executive officers as a group.

Amount and Nature
Name Of Beneficial Shares Subject Percentage
Of Beneficial Owner Ownership (1) To Option (2) Of Class (3)

Roy L. Faulks 11,500 11,000 *
Frederick B. Karl 10,501 10,001 *
Dr. John M. Palms 7,500 7,500 *
Joseph D. Sargent 10,001 10,001 *
John P. Seibels 18,834 15,834 *
Richard G. Trub 10,201 10,001 *
G. Larry Wilson 350,728 (4) 273,333 1.8%
David T. Bailey 118,821 (5) 117,833 *
Donald A. Coggiola 149,653 (6) 144,166 *
Stephen G. Morrison 27,890 27,619 *
Timothy V. Williams 27,098 27,098 *
Directors and all executive
officers as a group (13 873,586 (7) 777,466 4.5%
in number)

(1) Except where noted below, each individual has sole voting and sole
dispositive power.

(2) These shares, which are included in the "Amount and Nature of Beneficial
Ownership" column, are subject to option on or before May 28, 1996,
pursuant to the Company's various stock option plans.

(3) Less than one percent where indicated by asterisk.

(4) 139 of these shares are held in the Company's 401(k) Retirement Savings
Plan for which Mr. Wilson has sole dispositive power but no voting power.

(5) 322 of these shares are held in the Company's 401(k) Retirement Savings
Plan for which Mr. Bailey has sole dispositive power but no voting power.

(6) 138 of these shares are held in the Company's 401(k) Retirement Savings
Plan for which Mr. Coggiola has sole dispositive power but no voting power.

(7) An aggregate of 1,193 of these shares are held in the Company's 401(k)
Retirement Savings Plan for which the respective executive officer has
sole dispositive power but no voting power for the shares allocated to
his account.

COMPENSATION PLANS AND ARRANGEMENTS

COMPENSATION OF DIRECTORS: Directors who are not full-time employees of the
Company receive an annual fee of $15,000, plus $2,000 for each Board meeting
attended and $1,000 for each committee meeting attended on other than a
regular Board meeting date. Directors participating in any meeting by
telephone receive a $250 fee for such meeting. Directors who do not reside in
Columbia, South Carolina, are reimbursed for travel expenses. During 1995,
none of the Directors exercised options.

COMPENSATION OF EXECUTIVE OFFICERS: The following table sets forth
information regarding compensation earned, including stock options granted,
during 1993, 1994 and 1995 by the Chief Executive Officer and the four other
most highly compensated executive officers of the Company ("Executive Group").

SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Number of
Name Securities All
and Underlying Other
Principal Annual Compensation Options Compen-
Position Year Salary Bonuses (1) Granted sation (2)

G. Larry Wilson 1995 $592,310 $192,000 75,000 $8,505
President and Chief 1994 500,776 138,000 275,000 4,500
Executive Officer 1993 496,930 50,000 100,000 7,284

David T. Bailey 1995 $312,455 $ -0- 35,000 $6,750
Executive Vice 1994 282,573 49,632 135,000 4,500
President 1993 280,482 -0- 50,000 7,075

Donald A. Coggiola 1995 $307,768 $ 49,600 85,000 $6,750
Executive Vice 1994 281,120 49,456 75,000 648
President 1993 279,546 -0- 50,000 7,075

Stephen G. Morrison 1995 $520,700 -0- 25,000 $8,505
Executive Vice 1994 345,146 -0- 96,667 -0-
President, General
Counsel and
Secretary (3)

Timothy V. Williams 1995 $293,458 $ 94,400 25,000 $6,750
Executive Vice 1994 248,560 48,400 95,972 1,904
President
and Chief Financial
Officer (4)

(1) Reflects amount earned in year indicated even though actually paid in
following year and for Mr. Wilson includes $50,000 earned under his
Executive Compensation Agreement which was terminated in early 1995 and
for this reason no amount was earned under that Agreement in 1995 (see
"Executive Compensation Agreement").

(2) Amounts shown are matching contributions from the Company under its
401(k) Retirement Savings Plan and the Company's Employee Stock Purchase
Plan.

(3) Mr. Morrison joined the Company during 1994 and for this reason
compensation data for 1993 is not included. Under the terms of Mr.
Morrison's employment agreement with the Company, Mr. Morrison is eligible
for an annual bonus of up to 40% of his base salary. In his employment
agreement, the 40% annual bonus for the first two years of Mr. Morrison's
employment is guaranteed and therefore not contingent. For this reason,
the annual bonuses earned in 1994 and 1995 are contained in the "salary"
column.

(4) Mr. Williams joined the Company in February, 1994 and for this reason
compensation data for 1993 is not included.

The following table sets forth certain information regarding options for
Common Stock granted to the Executive Group during 1995. The table includes
the potential realizable value which would exist based on assumed annual
compounded rates of Common Stock price appreciation of five and ten percent
over the full ten-year term of the options.

OPTIONS GRANTED IN 1995
Individual Grants

Percent Potential Realizable Value
Number of Total at Assumed Annual Rates
of Securities Options Exercise of Stock Price Appreciation
Underlying Granted to Price Expiration for Option Term
Options Employees Per Date Of
Granted(1) in 1995 Share Options 5% 10%

All Stockholders $596,686,907(2) $1,512,120,441(2)
G. Larry Wilson 75,000 (3) 11% $49.00 May 10, 2005 2,311,189(2) 5,857,002(2)
David T. Bailey 35,000 (3) 5% $49.00 May 10, 2005 1,078,555(2) 2,733,268(2)
Donald A. Coggiola 25,000 (3) 13% $49.00 May 10, 2005 770,396(2) 1,952,334(2)
10,000 (4) 48.75 July 20, 2005 306,586(2) 776,949(2)
50,000 (5) 45.25 November 8, 2005 1,422,875(2) 3,605,841(2)
Stephen G. Morrison 25,000 (3) 4% $49.00 May 10, 2005 770,396(2) 1,952,334(2)
Timothy V. Williams 25,000 (3) 4% $49.00 May 10, 2005 770,396(2) 1,952,334(2)

<FN>

(1) The options granted in 1995 to the named executive officers were
pursuant to the 1989 Stock Option Plan. The exercise price for all such
grants is the fair market value of the Common Stock on the date of grant.
The options become exercisable in one-fifth increments on each of the
first five anniversary dates of the grant date. All such options would
become immediately exercisable in the event of a change in control of the
Company and the optionee would have, notwithstanding other provisions of
1989 Stock Option Plan, the right to exercise such options for a period
of ninety days after termination of employment. In the event of a
dissolution or liquidation of the Company or any merger or combination
in which the Company is not the surviving entity, each option granted
shall terminate, but not before each optionee is permitted to exercise
his or her options to the extent they are exercisable, without regard to
any installment exercise provision in the 1989 Stock Option Plan.

(2) The potential realizable value for all Stockholders is based on the
number of shares of Common Stock outstanding on May 10, 1995 (the date the
options described in note 3 below were granted) and assumes the
Stockholders purchased the Common Stock for $49.00 (which was the fair
market value of the Common Stock on May 10, 1995) and held the Common
Stock until May 10, 2005. The Company has included this information to
illustrate how the Stockholders will have fared compared to each of the
named executives if the assumed appreciation is achieved.

(3) These options were granted on May 10, 1995.

(4) These options were granted on July 20, 1995.

(5) These options were granted on November 8, 1995.

The following table sets forth information regarding the value of
"in-the-money" options, which are options having a positive difference between
the exercise price of such stock option and the 1995 year-end market price of
Common Stock. None of the officers in the Executive Group exercised options
during 1995.

AGGREGATED YEAR-END OPTION VALUES
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1995 at December 31, 1995 *

Name Exercisable Unexercisable Exercisable Unexercisable
G. Larry Wilson 241,666 408,334 $1,233,655 $1,396,095
David T. Bailey 99,166 195,834 312,255 768,545
Donald A. Coggiola 130,833 189,167 858,128 590,172
Stephen G. Morrison 14,286 107,381 244,719 989,520
Timothy V. Williams 13,765 107,207 176,734 758,740

* Value represents the aggregate excess of the market price of the Common
Stock on December 31, 1995, which was $47.63, over the exercise price for
the options. All options included in the table have an exercise price
equal to or greater than the fair market value of the Common Stock on
the dates of grant.

EXECUTIVE COMPENSATION AGREEMENT: The Company had an Executive Compensation
Agreement with Mr. Wilson whereby the Company was obligated to pay, subject
primarily to his continued employment, certain specified amounts over a
five-year period. The specified amounts to be paid over a five-year period
consisted of five annual installments of $10,000 each for a given year's
bonus. Thus, a bonus of $50,000 was earned for a given year but was paid over
a five-year period such that after the fifth year, assuming the Agreement was
renewed during each of the five years, Mr. Wilson would be entitled to a
payment of $50,000, i.e., first $10,000 installment from the prior year, plus
the second $10,000 installment from two years prior plus the third $10,000
installment from three years prior, etc. This Agreement was renewable
annually at the option of the Company. A payment of $50,000 was paid in early
1995. As a result of other changes and increases in the compensation package
for Mr. Wilson which were made in early 1995, the Compensation Committee of
the Board of Directors elected at that time to not renew the Agreement and
therefore no further amounts will be paid or earned under this Agreement.

DFERRED COMPENSATION AGREEMENT: Mr. Wilson is covered by a Deferred
Compensation Agreement providing annual remuneration of $25,000 upon
retirement, death or total disability. The Agreement, which provides for
monthly payments over a fifteen-year period, is contingent primarily upon his
continued employment until such an event occurs, and the deferred benefits are
not vested until that time. Until or unless such a qualifying event occurs,
Mr. Wilson is not entitled to any payments under the Agreement. The Company
owns life insurance contracts covering Mr. Wilson, of which it is the
beneficiary, in an aggregate amount equal to or in excess of the total
benefit.

EMPLOYMENT AGREEMENTS: The Company has an agreement with each of the
executive officers named in the Summary Compensation Table above, as well as
with Paul R. Butare, also an executive officer, which provide that if there is
a change in control of the Company, as that term is defined in the Agreement,
the individual shall be paid an annual salary, for a

period of two years following such change in control, equal to 100% of his
average annual cash compensation, based on the two years prior to such change
in control. However, the total amount to be paid shall not exceed the amount
which would cause such payment to be deemed a "parachute payment" as defined
in Section 280G of the Internal Revenue Code. The Agreements also provide
that the payments to the executive officer cease in the event of reasonable
proof of any violation of the non-competition or confidentiality provisions of
the Agreement or in the event employment is terminated for cause. Also, if
during a potential change in control or following a change in control an
individual voluntarily terminates employment for other than good reason, his
annual salary is payable for only one year following such termination of
employment.

For stock options granted on or after October 13, 1994 for the executive
officers named in the Summary Compensation Table above, and July 20, 1995 for
Mr. Butare, the Stock Option/Non-Compete Agreements for the aforementioned
executive officers also provide that if there is a change in control of the
Company such options would become immediately exercisable in the event of a
change in control and the optionee would have, notwithstanding other
provisions of the 1989 Stock Option Plan, the right to exercise such options
for a period of ninety days after termination of employment. In no event,
however, may an optionee exercise such options after the tenth anniversary
date of the date of grant of such options.

The Company also has Employment Agreements with Mr. Morrison, who serves as
the Company's General Counsel, Secretary and Executive Vice President, and
with Mr. Williams, who serves as the Company's Chief Financial Officer and
Executive Vice President. These Agreements set the initial annual salaries
for Messrs. Morrison and Williams at $360,000 and $275,000, respectively,
subject to future adjustments in accordance with the Company's practices.
The term of each Agreement is through December 31, 1998.

There was a transition period in 1994 during which Mr. Morrison continued to
devote significant time to the practice of law as a partner with the firm of
Nelson, Mullins, Riley & Scarborough as well as to the Company. During this
transition period, Mr. Morrison's compensation was adjusted to approximate the
portion of time he was devoting to the Company and is reflected in the Summary
Compensation Table. Even after the transition period, Mr. Morrison has
continued his affiliation with Nelson, Mullins, Riley & Scarborough. The
Employment Agreement the Company has with Mr. Morrison also states that he
will be eligible to participate in the annual bonus program, pursuant to which
he may earn up to 40% of his base salary. For the first two years, however,
the bonus is guaranteed for the full 40%. Under the Agreement, Mr. Morrison
is also entitled to receive annually options to purchase at least 25,000
shares of Common Stock under a Company-sponsored stock option plan.

The Employment Agreement for Mr. Williams also states that he will be eligible
to participate in the annual bonus program, pursuant to which he may earn up
to 40% of his base salary. Under the Agreement, Mr. Williams is eligible to
receive annually options to purchase at least 25,000 shares of Common Stock
under a Company-sponsored stock option plan.

The Employment Agreements for Messrs. Morrison and Williams contain a
provision that if there is a change in control of the Company, the executive
officer shall be paid, for the remaining term of the Employment Agreement plus
one year, an annual salary equal to 150% of his average cash compensation for
the two calendar years preceding such change in control. He shall be paid
during the same period, as compensation for his non-competition agreement, 50%
of such average amount. However, the total amount to be paid shall not exceed
the amount which would cause such payment to be deemed a "parachute payment"
as defined in Section 280G of the Internal Revenue Code.

The payments under the Employment Agreements with Messrs. Morrison and
Williams would cease in the event of reasonable proof of any violation of the
non-competition or confidentiality provisions of the Employment Agreement or
in the event the executive officer's employment is terminated for cause.
Also, if during a potential change in control or following a change in control
the individual were to voluntarily terminate employment for other than good
cause, the annual salary is payable for only one year following such
termination of employment. The change in control provisions in Messrs.
Morrison's and Williams' Employment Agreements supersede those in their Stock
Option/Non-Compete Agreements described above during the terms of their
respective Employment Agreements to the extent there is a conflict.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION: Decisions on
compensation of the Company's executive officers generally are made by the
Compensation Committee of the Board and reviewed with the full Board. Set
forth below is a report of the Board's Compensation Committee addressing the
Company's compensation policies for 1995 for its executive officers.

compensation philosophy. The Committee believes that the Company must pay
competitively to attract and retain qualified executives. To motivate
executive personnel to perform at their full potential, the Committee believes
a significant portion of compensation should be incentive-based. In addition,
the Committee believes it is important to reward not only individual
performance and achievement, but also to focus on overall corporate results.
This latter objective serves the dual purpose of encouraging teamwork among
executives and also supporting the Company's objective of increasing
Stockholder value. The Committee also believes it is essential that the
Committee retain the flexibility to evaluate not only the overall performance
of the individual executive officers and the Company as a whole, but also all
other circumstances and challenges facing the Company and the respective
executive officer. Consequently, the Committee uses its subjectivity rather
than objective formulas in setting and adjusting the base salary of the
executive officers.

elements of compensation. Compensation earned during 1995, as reflected in
the foregoing tables, consisted primarily of three parts: salary; annual
bonus; and award of stock options. (The executive officers were also eligible
for other benefits such as perquisites standard for executives and those
offered under the Company-sponsored broad-based plans.) Each of these elements
is described in more detail below.

base salaries for executive officers. For 1995, although no formal studies
were conducted, base salaries for all executive officers were targeted at
slightly below the base salaries which the Company's peers might offer their
executive officers for performing similar functions in an equally challenging
and complex environment. In addition, the Committee used its subjective
assessment of the overall performance of the individual executive officer in
terms of responsibility, experience and breadth of knowledge and the Company
as a whole. No specific weight was assigned to these factors.

With respect to Mr. Wilson, in addition to the above factors, the Committee
also considered how well he performed in the following areas in determining
his base salary increase: development and implementation of a strategic vision
for the Company integrating insurance industry knowledge, technology trends,
product directions, and customers' needs; management of the Company's
financial affairs; recruitment and retention of qualified executives;
delegation of responsibility and authority to qualified managers;
capitalization on business opportunities; and exhibition of leadership in
achieving the Company's goals. No specific weight was assigned to these
factors. In addition, in determining the amount of increase in compensation
in 1995, the Committee considered the Company's actual results for 1994 in the
areas of product development, new business acquisitions, overall financial
strength, perceived customer satisfaction and the Company's prospects for
long-term growth.

The Committee believed that Mr. Wilson's contribution to the Company's 1994
performance was significant, therefore, in determining the amount of increase
in compensation in 1995, the Committee increased his base salary by 10%, in
addition to the $50,000 increase in base salary in recognition of the
Committee's decision not to renew the Executive Compensation Agreement with
Mr. Wilson. Under that Agreement, Mr. Wilson was eligible for a bonus of
$50,000 annually.

annual bonus program. The 1995 annual bonus program for executive officers
was intended to provide short-term incentives and rewards based on the
Company's short-term goals that were consistent with its long-term goals, as
well as to promote the Company's philosophy of having a substantial portion of
executive compensation "at risk." It was the Committee's subjective assessment
that for the executive officers, an amount equal to 40% of base salary was an
appropriate percentage to have at risk on an annual basis.

The annual bonus for executive officers with profit and loss responsibility
reporting to the Chief Executive Officer (a "P&L Executive Officer") was
generally comprised of two parts. One part was based on the Company's
performance, as measured by targeted earnings-per-share for 1995 and the
target established for 1996 for earnings-per-share. If actual 1995
earnings-per-share were less than the target or the target for 1996 was
reduced, the bonus was to be reduced for 1995 by a stated percentage. The
other part was based on the performance of the group for which the executive
is responsible, as measured against the business plan established in the prior
year for the executive's group and the target performance for the group
established for 1996. If the actual 1995 performance was less than the target
or if the established target for 1996 was reduced, the bonus was to be reduced
for 1995 by a stated percentage.

For Mr. Wilson and those executive officers other than the P&L Executive
Officers, the annual bonus was to be based on the Company's performance, as
measured by targeted earnings-per-share for 1995 and the target established
for 1996 earnings-per-share. Messrs. Morrison and Williams are the only
named executive officers who are not P&L Executive Officers. As with the P&L
Executive Officers, if the actual 1995 performance was less than the target or
if the established target for 1996 was reduced, the bonus was to be reduced
for 1995 by a stated percentage.

The Committee retained the discretion to use its subjective assessment to
award or withhold bonuses under the plan for any or all of the executive
officers. In early 1996, the Committee reviewed the level of bonuses which
would have been awarded to each executive officer under the plan described
above. Although the Company attained the 1995 targets, the Committee believed
that certain non-recurring events, such as a lower-than-anticipated effective
tax rate, contributed to the attainment of the 1995 targets. Consequently,
the Committee decided that the executive officers, including Mr. Wilson,
would have been entitled to an annual bonus under such a plan for more than
the amount which the Committee believed to be fair and equitable. Therefore,
the Committee exercised its discretion and awarded bonuses in amounts the
Committee believed to be fair and equitable and as set forth in the Summary
Compensation Table for 1995. With respect to Mr. Wilson, specifically, the
Committee determined that his bonus should equal eighty percent of the amount
he otherwise would have received under the plan. Under the terms of his
Employment Agreement, Mr. Morrison is guaranteed an annual bonus of a certain
amount for his first two years of employment (see "Employment Agreements").

stock option plans. The 1989 Stock Option Plan was designed for option grants
to key employees, including the executive officers. The Plan, by way of the
option vesting schedule for grants, is intended to provide incentives and
rewards for a relatively short-term (3 years)

to mid-term (5 years) and to provide a further means for aligning employees'
and Stockholders' interests in the enhancement of Stockholder value.

In determining the number of options to be granted in 1995, including the
number for Mr. Wilson, the Committee considered the historical pattern of
granting options under the 1989 Stock Option Plan as well as competitive
levels needed to retain the respective executive officer. In the Committee's
subjective assessment, the number and exercise price for options historically
granted annually to the executive officers has provided the appropriate
incentive and rewards. Consequently, for the options granted in 1995, the
Committee determined that granting, in most cases, approximately the same
number of options as has previously been granted would provide the appropriate
level of incentive and reward for the executive officers. In setting the
number and exercise schedule of options, the Committee considered the number
and terms of exercise of options previously granted to the executive officers,
as well as the competitive levels needed to retain the respective executive
officer.

compensation deduction limitation. In 1993, Section 162(m) was added to the
Internal Revenue Code. This section generally disallows the corporate tax
deduction for certain compensation paid in excess of $1,000,000 annually to
certain executive officers of publicly-held companies. An exception to the
deduction limit is for "performance-based compensation." The Company believes
that the 1993 Long-Term Incentive Plan for Executives and the Company's 1989
Stock Option Plan satisfy the requirements for qualifying stock options as
performance-based compensation under the exception. Therefore, the Company
expects that any stock option compensation realized upon the exercise of stock
options granted at a fair market value or higher exercise price under these
plans will not be subject to such compensation deduction limit. For this
reason, and because the Company's annual cash compensation to each of its
executive officers is currently below the $1,000,000 limit, the Company does
not at this time anticipate any loss of deductibility for 1995 under this law
for compensation paid to its executive officers.

Compensation Committee
Steven A. Denning, Chairman
Joe M. Henson
Frederick B. Karl
Joseph D. Sargent

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: During 1995, the
Compensation Committee of the Board of Directors of the Company consisted of
Messrs. Denning, Henson, Karl, and Sargent, none of whom are or were
previously employees or officers of the Company or any of the Company's
subsidiaries. Mr. Sargent is a director and executive officer of Connecticut
Surety Corporation, which received software licenses and data processing
services from the Company for which it paid the Company approximately $138,129
during 1995. The Company considers such transactions with Connecticut Surety
Corporation to have been on substantially similar terms as those prevailing at
the time for comparable transactions with unrelated third parties.

STOCK PERFORMANCE: The following graph compares the cumulative total
Stockholder return on the Company's Common Stock during the five years ended
December 31, 1995 with the cumulative total return on the Standard & Poor 500
Index and the Standard & Poor Computer Software and Services Index. The
comparison assumes $100 was invested on the last trading day of 1990 in the
Company's Common Stock and also in each of the indices and assumes
reinvestment of all dividends which may have been paid. The performance shown
in the graph is not necessarily indicative of future performance.

Indexed Returns
Years Ending

Company/Index Dec90 Dec91 Dec92 Dec93 Dec94 Dec95

The Company 100 160 198 75 101 115
S&P 500 100 130 140 155 157 215
Computer Software
& Services 100 152 181 230 272 383

CERTAIN TRANSACTIONS

In 1994, International Business Machines Corporation ("IBM") sold to the
Company 2,278,537 shares of the Company's Common Stock which IBM purchased in
1989. At the same time, IBM agreed to sell to General Atlantic Partners 14,
L.P. and GAP Coinvestment Partners, L.P. (collectively, "General Atlantic
Investors") the remaining 1,519,024 shares of Common Stock owned by IBM.

In March 1996, the Company entered a Stock Purchase Agreement with the General
Atlantic Investors pursuant to which they agreed to sell to the Company
759,512 of the shares of the Company's Common Stock they purchased in 1994.
The purchase price for the Company's repurchase of this Common Stock was
approximately $38 million. General Atlantic Investors and certain of their
affiliates are restricted by the aforementioned Stock Purchase Agreement from
acquiring an ownership interest in the Company beyond 4.99% for a period of
three years. At the same time, General Atlantic Investors entered into a
Stock Purchase Agreement with Continental Casualty Company ("CNA") pursuant to
which they agreed to sell to CNA the remaining 759,512 shares of Common Stock
owned by General Atlantic Investors for a purchase price of approximately $38
million. General Atlantic Investors' sales of the shares of Common Stock to
the Company and to CNA, respectively, closed on April 8, 1996 and upon such
closing, CNA owned approximately four percent of the Company's Common Stock
then outstanding. At that time, Steven A. Denning and Joe M. Henson resigned
from the Board of Directors of the Company. Pursuant to a Shareholders'
Agreement with the Company, dated April 26, 1994, General Atlantic Investors
were entitled to cause the Company's Nominating Committee of the Company's
Board of Directors to recommend a nominee to the Company's Board of Directors.
Mr. Denning was General Atlantic Investors' designee.

The Company and CNA entered into a Shareholder's Agreement ("Shareholder's
Agreement") and a Registration Rights Agreement ("Registration Rights
Agreement"), each dated March 8, 1996. The Shareholder's Agreement imposes
restrictions on the rights of CNA and certain of its affiliates to dispose of
shares of Common Stock except pursuant to a right of first offer in favor of
the Company or in other specified circumstances. Pursuant to the

Registration Rights Agreement, CNA and certain of its affiliates are entitled
to certain registration rights with respect to the Common Stock owned by them,
including the right to demand that the Company register such Common Stock
under the Securities Act of 1933, as amended, and the right to participate in
certain registrations initiated by the Company.

In addition, during 1995, Connecticut Surety Corporation, of which Mr. Sargent
is a director and an executive officer, received software licenses and data
processing services from the Company for which it paid the Company
approximately $138,129 during 1995. The Company considers such transactions
with Connecticut Surety Corporation to have been on substantially similar
terms as those prevailing at the time for comparable transactions with
unrelated third parties.

RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

(PROXY ITEM NO. 2): Stockholders will vote on the ratification of the
selection by the Board of Directors of Coopers & Lybrand as independent
auditors to audit the books, records and accounts of the Company and its
subsidiaries for the year ending December 31, 1996. Coopers & Lybrand has
been the independent auditors of the Company since August 1993, at which time
they were engaged to audit the Company's financial statements as of and for
the fiscal years ended December 31, 1992 and December 31, 1993. Subsequently,
Coopers & Lybrand has been the Company's auditors for the fiscal years ended
December 31, 1994 and 1995. A representative from Coopers & Lybrand is
expected to be present at the Meeting and will have the opportunity to make a
statement and will be available to answer questions.

The Board of Directors recommends that the Stockholders vote FOR the
ratification of the selection of Coopers & Lybrand as independent auditors for
the Company.

OTHER PROPOSALS

There is no reason to believe that any other business will be presented at the
Meeting; however, if any other business should properly and lawfully come
before the Meeting, the persons named in the proxy will vote in accordance
with their best judgment.

For a Stockholder proposal to be presented at the next annual meeting, it must
be received by the Company not later than December 30, 1996, in order to be
included in the Proxy Statement and proxy for the 1997 annual meeting. Any
such proposal should be addressed to the Company's Secretary and mailed to
Post Office Box Ten, Columbia, South Carolina 29202.

Stephen G. Morrison
Secretary

PROXY

THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS
May 28, 1996

POLICY MANAGEMENT SYSTEMS CORPORATION
ONE PMS CENTER
BLYTHEWOOD, SOUTH CAROLINA 29016

The undersigned hereby appoints Roy L. Faulks and G. Larry Wilson proxies with
full power of substitution and revocation to vote on the undersigned's behalf
at the Annual Meeting of the Stockholders of Policy Management Systems
Corporation, to be held at 11:00 a.m., May 28, 1996, in the offices of the
Company, One PMS Center, Blythewood, South Carolina, and at all adjournments
thereof, upon all business as may properly come before the Meeting, including
the following as more fully described in the Notice of Annual Meeting and
Proxy Statement, receipt of which is hereby acknowledged. PROXIES WILL BE
VOTED IN ACCORDANCE WITH ANY INSTRUCTIONS INDICATED BELOW. IF NO
SPECIFICATION IS MADE, PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS
AND RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS. THIS PROXY IS
REVOCABLE ANY TIME PRIOR TO ITS USE.

1. ELECTION OF DIRECTORS FOR all nominees named below (except as
marked to the contrary below)

WITHHOLD AUTHORITY to vote for
all nominees named below

NOMINEES: (1) Dr. John M. Palms; (2) John P. Seibels

(INSTRUCTIONS: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.)

2. RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P.
AS INDEPENDENT AUDITORS FOR THE COMPANY

FOR AGAINST ABSTAIN

In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.

Date
X

(Signature should agree with name on stock, as shown hereon. Officers,
fiduciaries, etc., so indicate. When shares are held in the names of more
than one person, each person should sign the proxy.)