FORM 10-Q/A
			  Amendment No. 1     

		   SECURITIES AND EXCHANGE COMMISSION
			 Washington, D.C. 20549
(Mark One)

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

	For the quarterly period ended:    September 30, 1995

	OR

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

	For the transition period from __________ to___________

Commission File Number 1-4471

			    XEROX CORPORATION
		      (Exact Name of Registrant as
			 specified in its charter)

	    New York                       16-0468020             
 (State or other jurisdiction   (IRS Employer Identification No.) 
of incorporation or organization)

			      P.O. Box 1600
		     Stamford, Connecticut   06904-1600
		  (Address of principal executive offices)
				(Zip Code)

			     (203) 968-3000                 
	  (Registrant's telephone number, including area code)
 
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           

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

    Class                        Outstanding at September 30,1995

Common Stock                              107,852,063  shares
Class B Stock                                   1,000  shares

		  This document consists of 39 pages.
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2 
 
			    Xerox Corporation
			       Form 10-Q
			    September 30, 1995

			    Table of Contents
							     Page
Part I -  Financial Information

   Item 1. Financial Statements

      Consolidated Statements of Income                         4

      Consolidated Balance Sheets                               5

      Consolidated Statements of Cash Flows                     6

      Supplemental Cash Flows Information                       7

      Notes to Consolidated Financial Statements                8


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

      Financial Summary                                        14

      Document Processing                                      16

      Insurance                                                23

      Discontinued Operations                                  30

      Liquidity and Capital Structure                          32

      Capital Resources                                        33

      Hedging Instruments                                      34


Part II - Other Information

   Item 1. Legal Proceedings                                   36

   Item 6. Exhibits and Reports on Form 8-K                    36

Signatures                                                     37


Exhibit Index

   Computation of Net Income per Common Share                  38

   Computation of Ratio of Earnings to Fixed Charges           39
3 
 



PART I - FINANCIAL INFORMATION
				 Xerox Corporation
			  Consolidated Statements of Income

					 Three months ended  Nine months ended
					     September 30,     September 30,
(In millions, except per-share data)         1995     1994     1995     1994

Document Processing

Revenues
  Sales                                   $ 2,087  $ 1,830   $ 6,048  $ 5,154
  Service and rentals                       1,694    1,552     5,054    4,587
  Finance income                              246      254       749      750
  Total Revenues                            4,027    3,636    11,851   10,491
Costs and Expenses
  Cost of sales                             1,181    1,097     3,466    3,074
  Cost of service and rentals                 856      752     2,540    2,209
  Equipment financing interest                123      124       378      374
  Research and development expenses           243      217       709      639
  Selling, administrative and general 
    expenses                                1,164    1,067     3,442    3,134
  Other, net                                   45       33       122      143
  Total Costs and Expenses                  3,612    3,290    10,657    9,573
  Income before Income Taxes, Equity Income
    and Minorities' Interests                 415      346     1,194      918
  Income Taxes                                160      136       462      361
  Equity in Net Income of Unconsolidated
    Affiliates                                 38       25       102       63
  Minorities' Interests in Earnings of
    Subsidiaries                               37       50       137      137
Income from Document Processing               256      185       697      483

Insurance

Revenues
  Insurance premiums earned                   464      550     1,497    1,726
  Investment and other income                 106      112       337      323
  Total Revenues                              570      662     1,834    2,049
Costs and Expenses
  Insurance losses and loss expenses          406      434     1,261    1,333
  Insurance acquisition costs and other
    insurance operating expenses              145      168       475      553
  Interest expense                             54       51       175      155
  Administrative and general expenses          33       20       102       43
Total Costs and Expenses                      638      673     2,013    2,084
  Realized Capital Gains                       32        4        46       13
Income (loss) before Income Taxes             (36)      (7)     (133)     (22)
  Income Tax Benefits                          16        8        57       22 
Income (loss) from Insurance                  (20)       1       (76)       - 

Total Company

Net Income                                 $  236  $   186   $   621  $   483

Primary Earnings per Share                 $ 2.03  $  1.61   $  5.33  $  3.97

Fully Diluted Earnings per Share           $ 1.93  $  1.53   $  5.09  $  3.84
See accompanying notes.
4 
 



				Xerox Corporation
			   Consolidated Balance Sheets
					   September 30,     December 31,
(In millions, except share data in thousands)      1995             1994
Assets

Document Processing
Cash                                           $     51          $    35
Accounts Receivable, net                          2,005            1,811
Finance Receivables, net                          3,895            3,910
Inventories                                       2,946            2,294
Deferred Taxes and Other Current Assets           1,057            1,199
  Total Current Assets                            9,954            9,249
Finance Receivables Due after One Year, net       6,077            6,038
Land, Buildings and Equipment, net                2,075            2,108
Investments in Affiliates, at equity              1,492            1,278
Goodwill                                            631               66
Other Assets                                        691              635
  Total Document Processing Assets               20,920           19,374
Insurance
Cash                                                 86               21
Investments Available-for-Sale                    7,148            8,384
Reinsurance Recoverable                           2,588            3,063
Premiums and Other Receivables                    1,808            1,276
Goodwill                                            248              284
Deferred Taxes and Other Assets                   1,171            1,438
  Total Insurance Assets                         13,049           14,466
Investment in Discontinued Operations             3,657            4,692
 
Total Assets                                   $ 37,626         $ 38,532
									
Liabilities and Equity

Document Processing
Short-Term Debt and Current Portion of 
  Long-Term Debt                               $  3,081        $   3,159
Accounts Payable                                    432              562
Accrued Compensation and Benefit Costs              664              709
Unearned Income                                     240              298
Other Current Liabilities                         1,937            2,110
  Total Current Liabilities                       6,354            6,838
Long-Term Debt                                    6,401            5,494
Liability for Postretirement Medical Benefits     1,027            1,006
Deferred Taxes and Other Liabilities              2,131            2,210
  Total Document Processing Liabilities          15,913           15,548
Insurance
Unpaid Losses and Loss Expenses                   7,711            8,809
Unearned Income                                     885            1,066
Notes Payable                                       388              425
Other Liabilities                                   928              954
  Total Insurance Operating Liabilities           9,912           11,254
Discontinued Operations Liabilities -                                   
  Life Reinsurance Payable and Other              3,256            4,194
Other Long-Term Debt and Obligations              2,436            2,102
Deferred ESOP Benefits                             (596)            (596)
Minorities' Interests in Equity of Subsidiaries     748            1,021
Preferred Stock                                     767              832
Common Shareholders' Equity                       5,190            4,177

Total Liabilities and Equity                   $ 37,626        $  38,532
Shares of common stock issued and outstanding        107,852           105,993
See accompanying notes.
5 
 
				  Xerox Corporation
			  Consolidated Statements of Cash Flows
Nine months ended September 30,     (In millions)       1995          1994

Cash at Beginning of Period
Document Processing                                  $    35       $    68
Insurance                                                 21            18
  Total                                                   56            86
Document Processing
Cash Flows from Operating Activities                      24           (81)
Cash Flows from Investing Activities                                      
  Cost of additions to land, buildings and equipment    (295)         (255)
  Proceeds from sales of land, buildings and equipment    46           152
  Purchase of additional interest in Rank Xerox         (972)            -
  Net change in payables to Insurance                    (43)           (9)
  Net transactions with Insurance                        112            47
  Net transactions with Discontinued Operations           35            25
    Total                                             (1,117)          (40)
Cash Flows from Financing Activities
  Net change in debt                                   1,392           840
  Yen financing repayment                                  -          (116)
  Dividends on common and preferred stock               (292)         (297)
  Proceeds from sale of common stock                     120            78
  Redemption of preferred stock                          (65)         (241)
  Dividends to minority shareholders                     (64)          (69)
  Net proceeds (returned to)/received from
   minority shareholders                                  20           (32)
    Total                                              1,111           163
Effect of Exchange Rate Changes on Cash                   (2)          (68)
    Net Cash Flows from Document Processing               16           (26)
Insurance
Cash Flows from Operating Activities                    (364)         (110)
Cash Flows from Investing Activities                                       
  Proceeds from sale of Constitution Re                  421             -
  Proceeds from sale of Viking                           105             -   
  Purchase of portfolio investments                   (1,310)       (1,807)
  Proceeds from sales of portfolio investments         6,135           575
  (Increase)decrease in short-term investments        (4,416)          976
    Subtotal                                             935          (256)
  Other, net                                             (35)          (13)
  Net transactions with Discontinued Operations           61            12
    Total                                                961          (257)
Cash Flows from Financing Activities
  Net change in notes payable                            (37)          210 
  Net change in debt                                    (383)          196
  Net transactions with Document Processing             (112)          (47)
    Total                                               (532)          359
    Net Cash Flows from Insurance                         65            (8)
Discontinued Operations
  Income from discontinued operations                      -             -
  Collections and changes in assets, net               1,034           164
  Net change in debt                                      10          (126)
  Net change in operating liabilities                   (948)           (1)
  Net transactions with Document Processing              (35)          (25)
  Net transactions with Insurance                        (61)          (12)
    Net Cash Flows from Discontinued Operations           -              -

Cash at End of Period
Document Processing                                       51            42
Insurance                                                 86            10
  Total                                              $   137       $    52
See Supplemental Cash Flows Information and accompanying notes.
6
 


				   Xerox Corporation
			  Consolidated Statements of Cash Flows
			   Supplemental Cash Flows Information

Reconciliation of income to cash flows from operating activities:
Nine months ended September 30,     (In millions)        1995         1994

Document Processing 
Income from Document Processing                        $  697       $  483
Adjustments required to reconcile income to cash
 flows from operating activities:
  Depreciation and amortization                           486          476
  Provisions for doubtful accounts                        201          161
  Provision for postretirement medical benefits            37           41
  Charges against 1993 restructuring reserve             (258)        (295)
  Minorities' interests in earnings of subsidiaries       137          137
  Undistributed equity in income of affiliated companies  (99)         (58)
  Increase in inventory                                  (819)        (635)
  Increase in finance receivables                        (172)        (255)
  Increase in accounts receivable                        (256)        (248)
  Decrease in accounts payable and accrued compensation 
    and benefit costs                                     (34)         (26)
  Net change in current and deferred income taxes         207           72
  Other, net                                             (103)          66

Cash Flows from Operating Activities                   $   24       $  (81)
									   
Insurance
Loss from Insurance                                    $  (76)       $   -
Adjustments required to reconcile income to cash
 flows from operating activities:
  Depreciation and amortization                            27           24
  Provisions for doubtful accounts                          9            5
  Realized capital gains                                  (46)         (13)
  (Increase)decrease in receivables                      (213)         277
  Increase in accounts payable and accrued 
     compensation and benefit costs                        49           17
  Increase in unearned income                              47           34
  Decrease in unpaid losses and loss expenses            (304)        (411)
  Other, net                                              143          (43)

Cash Flows from Operating Activities                   $ (364)      $ (110)
									    
See accompanying notes.

7
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


1. The consolidated financial statements presented herein have 
been prepared by Xerox Corporation ("the Company") in accordance 
with the accounting policies described in its 1994 Annual Report 
to Shareholders and should be read in conjunction with the notes 
thereto. The 1994 financial statements presented herein have been 
reclassified to conform with the 1995 presentation.

In the opinion of management, all adjustments (consisting only of 
normal recurring adjustments) which are necessary for a fair 
statement of operating results for the interim periods presented 
have been made. Interim financial data presented herein are 
unaudited.


2. Inventories consist of (in millions):

				    September 30,      December 31,
					    1995              1994

Finished products                       $  1,905          $  1,458
Work in process                              100                88
Raw materials and supplies                   369               268
Equipment on operating leases, net           572               480
    Total                               $  2,946          $  2,294


3. Common shareholders' equity consists of (in millions):

				    September 30,      December 31,
					    1995              1994

Common stock                            $    109          $    107
Additional paid-in-capital                 1,531             1,406
Retained earnings                          3,511             3,197
Net unrealized loss on
  investment securities                       (1)             (433)
Translation adjustments                       40              (100)
    Total                               $  5,190          $  4,177


4. Effective January 1, 1995, the Company changed the reporting 
periods of the companies owned jointly with The Rank Organisation 
Plc ("RO")("the Rank Xerox Companies") and Latin American 
operations from fiscal years ending October 31 and November 30, 
respectively, to a calendar year ending December 31.  The results 
of these operations during the period between the end of the 1994 
fiscal year and the beginning of the new calendar year ("the stub 
period") were recorded as a direct charge to retained earnings 
and amounted to a loss of $21 million.  The charge to retained 
earnings was made to avoid reporting more than twelve months 
results of operations in one year.  Accordingly, the Company's 
1995 Consolidated Statements of Income reflect the results of 
worldwide operations for periods beginning January 1, 1995.  The 
Consolidated Statement of Cash Flows reflects the cash activity 

8
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


for the stub period in the "Other, net" line of the Document 
Processing Operating Activities section.


5. On February 28, 1995, the Company paid RO 620 million pounds sterling, or 
approximately $972 million, for 40 percent of RO's financial 
interest in the Rank Xerox Companies.  The transaction increased 
the Company's financial interest in the Rank Xerox Companies to 
80 percent from 67 percent.  Based on the allocation of the 
purchase price, this transaction resulted in goodwill of 
approximately $574 million (including transaction costs), a 
decline in minorities' interests in the equity of subsidiaries of 
approximately $400 million, and an increase in long-term debt of 
$972 million.  The goodwill will be amortized on a straight-line 
basis over 40 years.


6. The Company's Consolidated Balance Sheet at September 30, 1995 
includes current and non-current accrued liabilities of $258 
million and $221 million, respectively, associated with the 
Document Processing restructuring program announced in December 
1993.  At December 31, 1994, the corresponding accrued 
liabilities aggregated $765 million.  During the stub period and 
the nine month period ended September 30, 1995, $30 million and 
$256 million of net pre-tax charges, respectively, were charged 
against the aggregate reserve balance.  Management believes the 
aggregate reserve balance of $479 million at September 30, 1995 
is adequate for the completion of the restructuring program.  
Additional information concerning the progress of the 
restructuring program is included in the accompanying 
Management's Discussion and Analysis on page 19.


7. Other Information on the Company's Consolidated Statements 
follows:

Interest expense totaled $203 million and $181 million for the 
three months ended September 30, 1995 and 1994, respectively. 
Interest expense was $620 million and $541 million for the nine 
month periods then ended.

Long-term debt, excluding the current portion, totaled $9,037 
million at September 30, 1995 and $7,780 million at December 31, 
1994.


8. During April 1995, Talegen Holdings, Inc. ("Talegen"), a 
subsidiary of the Company, entered into an agreement with 
Guaranty National Corporation for the sale of Viking Insurance 
Holdings, Inc., ("Viking") a Talegen subsidiary. Revenues for 
Viking were (in millions) $161, $182, and $224 for the years 

9
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


ended December 31, 1994, 1993, and 1992, respectively.  On July 
18, 1995, the sale of Viking closed for approximately $103 
million in cash plus future upward price adjustments based on 
loss reserve development.  The transaction approximated book 
value.


9. On April 26, 1995, the sale of Constitution Re Corporation, 
another Talegen subsidiary, to EXOR America Inc. closed for a 
final purchase price of $421 million in cash, and resulted in a 
net loss of approximately $7 million.


10.  On June 1, 1995, Xerox Financial Services, Inc. (XFSI) 
completed the sale of its discontinued Xerox Financial Services 
Life Insurance Company and related subsidiaries to a subsidiary 
of General American Life Insurance Company for approximately $104 
million before settlement costs and capital funding of OakRe Life 
Insurance Company, another XFSI subsidiary. OakRe Life assumed 
responsibility for the Single Premium Deferred Annuity (SPDAs) 
policies issued by Xerox Life's Missouri and California companies 
via a coinsurance agreement.  As a result of this coinsurance 
agreement, the Company has retained on its consolidated balance 
sheet approximately $3.0 billion of investment portfolio assets 
and reinsurance reserves related to its former SPDA policies.  
These amounts will decrease over the next five years as the SPDA 
policies are either terminated by the policyholder or renewed and 
transferred to General American.


11. On June 1, 1995, XFSI established a $500 million letter of 
credit and line of credit with a group of banks to support OakRe 
Life's coinsurance obligations.  The term of this letter of 
credit is five years and it is unused and available at September 
30, 1995.  Upon a drawing under the letter of credit, XFSI has 
the option to cover the drawing in cash or to draw upon the 
credit line.


12. Litigation

Document Processing

On March 10, 1994, a lawsuit was filed in the United States 
District Court for the District of Kansas by two independent 
service organizations (ISOs) in Kansas City and St. Louis and 
their parent company. On April 15, 1994, another case was filed 
in the United States District Court for the Northern District of 
California by 21 different ISOs from 12 states. Plaintiffs in 
these actions claim damages (to be trebled) to their individual 
businesses resulting from essentially the same alleged violations 

10
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


of law at issue in the antitrust class action in Texas, which was 
settled by the Company during 1994. In one of the cases damages 
are unspecified and in the other damages in excess of $10 million 
are sought. In addition, injunctive relief is sought in both 
actions. Claims for individual lost profits of ISOs who were not 
named parties were not included in the class action. The two 
actions have been consolidated for pretrial proceedings in the 
District of Kansas. The Company has asserted counterclaims 
against certain of the plaintiffs alleging patent and copyright 
infringement, misappropriation of Xerox trade secrets, conversion 
and unfair competition and/or false advertising. The Company 
denies any wrongdoing and intends to vigorously defend these 
actions and pursue its counterclaims. 

Insurance
 
On September 15, 1992, International Surplus Lines Insurance 
Company, which has since been merged into International Insurance 
Company (International Insurance), a subsidiary of Talegen, filed 
a complaint in the United States District Court for the Southern 
District of Ohio, Eastern District, in Columbus, Ohio against 
certain underwriting syndicates at Lloyds of London and other 
foreign reinsurance companies. The complaint seeks a declaratory 
judgment that the defendants are obligated to reimburse 
International Insurance under various reinsurance contracts for 
approximately $255 million in payments made or to be made to 
Owens-Corning Fiberglas (OCF) for asbestos-related losses. In an 
Opinion and Order dated September 27, 1994, International 
Insurance's motion for summary judgment was granted. The court 
ruled that International Insurance's payment of OCF's losses, 
based on the determination that the manufacture, sale and 
distribution of products containing asbestos constituted a single 
occurrence, was reasonable and therefore binding on International 
Insurance's reinsurers. The defendants filed motions for 
reconsideration of the September 27 order. In order to avoid 
the expense of further litigation and possible appeals, International 
Insurance has executed settlement agreements with most of the 
defendants in the action. The recovery pursuant to the settlement 
agreements approximates the recorded reinsurance recoverable 
balance after consideration for amounts written-off for 
uncollectible reinsurance in prior years. Settlement discussions 
with the remaining defendants are continuing and are expected to 
result in additional executed settlement agreements with some or 
all defendants. As of September 30, 1995, approximately $18.6 
million is outstanding with these remaining reinsurers. The 
litigation is currently stayed by agreement of the parties 
pending the current discussions to settle the litigation in its 
entirety. 

In another OCF matter, on December 13, 1993, a complaint was 
filed in the United States District Court for the District of New 

11
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


Jersey against The North River Insurance Company (North River), a 
subsidiary of Talegen, by certain foreign insurance companies and 
underwriting syndicates at Lloyds of London seeking to recover 
certain sums paid, and to avoid certain sums to be paid, by them 
to North River under various reinsurance contracts. Such sums 
relate to approximately $106 million in defense expense costs 
North River paid under insurance policies it issued for asbestos 
bodily injury coverage to OCF; the payments resulted from a 
decision rendered in favor of OCF in a binding arbitration. Of 
this amount, plaintiffs paid North River approximately $68 
million; approximately $38 million remains unpaid. The reinsurers 
allege that North River misrepresented and withheld certain facts 
surrounding the decision and breached certain duties to its 
reinsurers. As part of the Talegen restructuring, International 
Insurance has assumed the rights and obligations with respect to 
these reinsurance contracts. A motion by North River to dismiss 
the complaint for lack of federal subject matter jurisdiction was 
granted on May 3, 1995. Plaintiffs refiled their claims in New 
York state court on June 28, 1995. On July 31, 1995, 
International Insurance filed a counterclaim for amounts 
plaintiffs have not paid. International Insurance believes it is 
entitled to the full payment of these reinsurance recoverables 
and will vigorously defend the foregoing action.

Farm & Home Savings Association (Farm & Home) filed a lawsuit in 
the United States District Court for the Western District of 
Missouri, Southwest Division alleging that under an agreement 
previously entered into by certain Talegen insurance companies 
(Insurance Companies) with Farm & Home (Indemnification 
Agreement), the Insurance Companies are required to defend and 
indemnify Farm & Home from actual and punitive damage claims 
being made against Farm & Home relating to the Brio superfund 
site (Brio). The Indemnification Agreement had been entered into 
in connection with the settlement of disputes between Farm & Home 
and the Insurance Companies regarding policies issued to Farm & 
Home during the time it was developing the Southbend subdivision 
in Friendswood, Texas (Southbend), which is close to Brio. Under 
the Indemnification Agreement, the Insurance Companies are 
required to indemnify Farm & Home only as to claims asserted by 
current or former residents of Southbend itself, or persons whose 
injuries are alleged to have been incurred as a direct 
consequence of exposure to allegedly hazardous substances within 
Southbend emanating from the Brio site. Farm & Home alleges that 
the Indemnification Agreement covers claims for injuries arising 
elsewhere than Southbend.  The Insurance Companies deny any 
liability to Farm & Home. Cross motions for summary judgment in 
the action are pending.  However, the parties have reached 
agreement in principle on a stand-still whereby the litigation 
will be dismissed with all parties reserving their rights.


12
 

			Xerox Corporation
	    Notes to Consolidated Financial Statements


In a number of lawsuits pending against Farm & Home in the 
District Courts of Harris County, Texas, plaintiffs seek both 
actual and punitive damages allegedly relating to injuries 
arising out of the hazardous substances at Brio. The Insurance 
Companies have been defending these cases under a reservation of 
rights because it is unclear whether certain of the claims fall 
under the coverage of either the policies or the Indemnification 
Agreement. In one of the pending cases, the court dismissed 
claims brought by plaintiffs who were unable to demonstrate a 
pertinent nexus to the Southbend subdivision.  In a second case, 
the plaintiffs' attorney has agreed to dismiss claims asserted by 
similarly situated plaintiffs.

13
 


			Xerox Corporation
	     Management's Discussion and Analysis of
	  Results of Operations and Financial Condition


The financial summary for the third quarter and year-to-date and 
this discussion present the operating results from Document 
Processing and Insurance with discontinued operations discussed 
separately.  Income from Insurance, as shown in the financial 
summary, includes assigned interest expense from the parent 
company.

Financial Summary
							    Year-to-date
(In millions,                       Third quarter           September 30,     
except per-share data)          1995    1994  % Growth   1995    1994 % Growth

Revenues
Document Processing            $4,027  $3,636     11%   $11,851  $10,491   13%
Insurance                         570     662    (14)     1,834    2,049  (10)
Total Revenues                 $4,597  $4,298      7    $13,685  $12,540    9

Net Income (Loss) 
Document Processing            $  256  $  185     38    $   697  $   483    44
Insurance                         (20)      1      *        (76)       -     *
Net Income                     $  236  $  186     27    $   621  $   483    29

Primary Earnings (Loss) 
  per Share
Document Processing            $ 2.21  $ 1.60     38    $ 6.02   $ 3.97     52
Insurance                        (.18)    .01      *      (.69)       -      *
Primary Earnings per Share     $ 2.03  $ 1.61     26    $ 5.33   $ 3.97     34

Fully Diluted Earnings (Loss) 
  per Share
Document Processing            $ 2.09  $ 1.53     37    $ 5.72   $ 3.84     49
Insurance                        (.16)      -      *      (.63)       -      *
Fully Diluted Earnings 
  per Share                    $ 1.93  $ 1.53     26    $ 5.09   $ 3.84     33

*  Calculation not meaningful. 

14
 


Summary of Total Company Results

In view of the Company's 1993 decision to concentrate its 
resources on its core Document Processing business and disengage 
from the Insurance and Other Financial Services (IOFS) businesses, 
management believes the most meaningful and appropriate portrayal 
of the Company's operating results and financial position is to 
report the Document Processing and Insurance businesses on a 
tiered basis within the Company's consolidated financial 
statements.

The MD&A on page 14 discloses earnings per share (EPS) for the 
Company's consolidated operations and for the Document Processing 
and Insurance Operations.  The presentation of separate Document 
Processing and Insurance EPS amounts is not in accordance with 
generally accepted accounting principles.  The Company believes, 
however, that for analytical purposes, these EPS amounts represent 
the contributions of the Company's two businesses to the 
consolidated results of operations and that the Document 
Processing results are an appropriate basis for comparison with 
future financial results from Document Processing.  EPS amounts 
presented in accordance with generally accepted accounting 
principles are on page 4.

15
 


Document Processing

Underlying Growth

To understand the trends in the business, the Company believes 
that it is helpful to adjust revenue and expense growth (except 
for ratios) to exclude the impact of changes in the translation of 
foreign currencies into U.S. dollars. This adjusted growth is 
referred to as "underlying growth."

When compared with the major European currencies, the U.S. dollar 
was approximately 10 percent weaker in the 1995 third quarter than 
in the 1994 third quarter, and approximately 13 percent weaker in 
the 1995 first nine months than in the 1994 first nine months.  As 
a result, foreign currency translation had a favorable impact of 3 
percentage points on total revenues in the 1995 third quarter and 
4 percentage points on total revenues in the 1995 first nine 
months.

The Company does not hedge the translation of foreign currency-
denominated revenues.

Revenues

Management estimates that the components of underlying revenue 
growth were as follows:

Underlying Growth
				 1995             1994         
			      Q3  Q2  Q1   FY   Q4   Q3   Q2  Q1

Total Revenues                8%  8%  11%  7%  11%   4%   6%   5%

Sales
 Equipment                    7   8    9   10   13    4   11   9
 Supplies                     9  10   22   11   22   10    3  10
 Paper                       42  42   52    4   21    1   (2) (1)
  Total                      11  12   18   10   14    5    9   9

Service/Rentals/FacMgmt/Other
 Service                      1   4   3     4    6    4    4   3
 Rentals                      3  (2)  3    (1)   5   (4)  (3) (7)
 Facilities Management/Other 38  28  33    20   22   20   22  17
   Total                      6   6   6     5    8    5    5   3

Finance Income               (7) (2) (4)   (4)  (3)  (3)  (6) (7)

Memo:
Non-Equipment Revenues        8   9  12     5    9    4    4   3

Total revenue growth of 8 percent in the 1995 third quarter was 
unchanged from the 1995 second quarter and a decline from the 

16
 

growth of 11 percent in the 1995 first quarter and the 1994 fourth 
quarter. 

The good growth in equipment sales in the third quarter reflected 
excellent growth in data center printing and color copying and 
printing, and good growth in production publishing and black-and-
white copying, which was somewhat offset by lower printer engine 
sales to original equipment manufacturers due to unusually high 
shipments in the third quarter of last year.  Excluding these OEM 
sales, equipment sales grew 12 percent which represents an 
improvement from earlier quarters this year.  On a geographical 
basis, continuing excellent growth in Brazil was moderated by 
demand in the U.S. and Europe.

Non-Equipment revenues from supplies, paper, service, rentals, 
facilities management and other revenues, and income from customer 
financing represented 68 percent of total revenues in the 1995 
third quarter, unchanged from the 1995 second quarter but a 
decline from 72 percent in the 1995 first quarter.  Growth in 
these revenues is primarily a function of the growth in the 
Company's installed population of equipment, usage and pricing.


  Supplies sales: The good growth in the 1995 third quarter and 
1995 second quarter, and the excellent growth in the 1995 first 
quarter are due principally to continued excellent growth in 
enterprise printing and cartridge sales for personal copiers.  
The declining sequential trend this year reflects lower OEM 
sales.
 
  Paper sales: The Company's policy is to charge a spread over 
mill wholesale prices to cover its costs and value added as a 
distributor.  The excellent growth this year is due primarily 
to higher worldwide prices.
 
  Service revenues: The modest growth in recent quarters reflects 
the diversionary trend to facilities management and competitive 
pricing pressures.
 
  Rental revenues: Non-U.S. rental revenues continued the long 
term decline reflecting a customer preference for outright 
purchase. In the U.S., however, there is an increasing trend 
toward cost-per-copy rental plans, which adversely affects 
upfront equipment sales, service revenues and finance income.  
This trend toward rentals rather than equipment sales also 
increases revenues in future periods but reduces current period 
total revenues.
 
  Facilities management, copy centers and other revenues: This 
growth reflects the trend of customers focusing on their core 
businesses and outsourcing their document processing 
requirements to Xerox.  This has the effect of diverting 

17
 

revenue from equipment sales, service and finance income. This 
trend toward facilities management rather than equipment sales 
can also increase revenues in future periods but reduce current 
period total revenues.
 
  Finance income: The decline is due to a continuation of the 
trend of lower interest rates on financing contracts.


Geographic Revenues

Geographically, the underlying revenue growth rates are estimated 
as follows:

			  1995                     1994         
		      Q3   Q2   Q1        FY   Q4   Q3   Q2   Q1

Total Revenues        8%   8%   11%        7%  11%   4%   6%   5%

United States         5    5     8         7   10    6    7    4
Rank Xerox            2    5    13         7   13    3    7    6
Other Areas          27   25    17         7   10    4    2    5

The Company's U.S. revenues grew 5 percent in the third quarter, 
equal to the second quarter and a decrease from the 1995 first 
quarter.  However, U.S. revenues, grew 9 percent in the third 
quarter excluding the impact of unusually high OEM printer engine 
sales in the third quarter last year, when a new customer placed a 
large order to fill its distribution channel.  Third quarter 
revenue growth was also adversely affected by some residual 
disruption from sales force productivity initiatives begun earlier 
this year.

Rank Xerox Limited and related companies (Rank Xerox) manufactures 
and markets Xerox products principally in Europe.  The Rank Xerox 
revenue growth rate declined from 13 percent in the 1995 first 
quarter and the 1994 fourth quarter to 5 percent in the 1995 
second quarter to 2 percent in the 1995 third quarter.  In the 
1995 third quarter revenue growth was good in the United Kingdom, 
Holland and the smaller European countries, and modest in Germany. 
Revenue in France declined for the second consecutive quarter 
primarily due to reduced government spending.  Due to the change 
to calendar-year financial reporting, the traditionally slow month 
of August falls in the third quarter this year compared with the 
fourth quarter in 1994. Revenue in Italy had no growth after 
excellent growth in the first half.  Revenue in Spain declined 
after strong growth in the first half.

Other Areas includes operations principally in Latin America and 
Canada. Revenue growth has been substantial in Brazil, strong in 
the smaller Latin American countries, and good in Canada.  In 
Brazil, since a new economic plan was implemented in July 1994, 
inflation has declined to 1-3 percent per month and the economy 

18
 

has shown strong growth.  In Mexico, revenues have declined 
significantly this year due to devaluation and the continuing 
economic disruption following devaluation of the Mexican peso in 
December 1994.  In 1994, full year revenues were $300 million in 
Mexico and over $1 billion in Brazil.

Major Product Categories

For the major product categories, the underlying revenue growth 
rates are estimated as follows:

			     1995                 1994        
			 Q3   Q2   Q1    FY   Q4   Q3   Q2   Q1

Total Revenues            8%  8%   11%    7%  11%   4%   6%   5%
   
Black & White Copiers     3   2     4     4    7    -    4    3
Enterprise Printing      18  20    22    20   22   17   22   21

Revenues from black-and-white copying represented 60 percent of 
total document processing revenues in the 1995 third and second 
quarters, 61 percent in the 1995 first quarter and 63 percent for 
the 1994 full year. Revenues from enterprise printing, including 
production publishing, data center printing, network printing, and 
color printing and copying, represented 24 percent of total 
revenues in the 1995 third and second quarters, 23 percent in the 
1995 first quarter and 22 percent for the 1994 full year.


Productivity Initiatives

In December 1993, the Company announced a restructuring program 
with the objectives of continuing to significantly reduce the cost 
base and to improve productivity. The Company's objective was to 
reduce its worldwide work force by more than 10,000 employees and 
to close or consolidate a number of facilities.  The Company 
achieved pre-tax cost reductions of approximately $350 million in 
1994, and expects to achieve approximately $700 million in 1995 
and higher amounts thereafter. However, a portion of these savings 
is being reinvested to reengineer business processes, to support 
expansion in emerging markets, and to mitigate anticipated 
continued pressure on gross margins.

Employment declined by 11,400 from year-end 1993 to 85,600 
employees at the end of the 1995 third quarter; 11,100 of the 
reductions were due to restructuring program initiatives and 1,300 
employees were transferred to Electronic Data Systems Corp. (EDS), 
partially offset by 1,000 net hires.  Employment declined by 200 
in the 1995 third quarter, including 500 due to the restructuring 
program, partially offset by the addition of 300 employees, 
principally to support the rapidly growing facilities management 
business.  For the 1995 first nine months, employment declined by 
2,000, including 3,500 due to the restructuring program, partially 

19
 

offset by the addition of 1,500 employees, principally to support 
the facilities management business.

To date, the activities associated with the productivity 
initiatives are on track towards achieving the Company's 
objectives.

Costs and Expenses

The gross margins by revenue stream were as follows:

Gross Margins
			1995                     1994         
		    Q3    Q2    Q1    FY    Q4    Q3    Q2    Q1

Total Gross Margin 46.4% 46.7% 45.2% 45.8% 45.3% 45.7% 46.2% 46.3%

Sales              43.4  43.3  41.2  40.7  41.5  40.1  40.6  40.3
Service/Rental     49.5  50.6  49.1  51.6  50.9  51.5  52.1  51.9
Financing          49.8  48.5  50.1  50.1  50.1  51.2  49.8  49.3

Total gross margins improved by 0.7 percentage points in the 1995 
third quarter from the 1994 third quarter.  The improvement of 3.3 
percentage points in the sales gross margin from the 1994 third 
quarter was principally due to cost reductions and favorable 
product and geographical mix, principally Brazil, partially offset 
by currency and increasing pricing pressures.  The erosion in the 
service and rentals gross margin of 2.0 percentage points from the 
1994 third quarter was largely due to significant inflationary 
cost increases which were not offset by pricing in Brazil, and 
pricing pressures, partially offset by productivity improvements.

Research and development (R&D) expense increased 12 percent in the 
1995 third quarter and 11 percent for the 1995 first nine months. 
The Company expects to continue to invest in technological 
development to maintain its premier position in the rapidly 
changing document processing market and expects to introduce a 
stream of new, technologically innovative products in the coming 
months.  The Company's R&D is strategically coordinated with that 
of Fuji Xerox Co., Ltd., an unconsolidated joint venture between 
Rank Xerox Limited and Fuji Photo Film Company Limited.  Fuji 
Xerox invested approximately $500 million in R&D in 1994.

Selling, administrative and general expenses (SAG) increased 6 
percent in the 1995 third quarter and the 1995 first nine months 
principally due to economic cost increases, particularly in 
Brazil, and investments in improved systems and sales distribution 
channels, partially offset by improved productivity.  SAG was 28.9 
percent of revenue in the third quarter, consistent with earlier 
quarters this year, and an improvement of 0.4 percentage points 
from the 1994 third quarter.

The increase in other expenses, net in the 1995 third quarter 
reflects higher interest expense principally due to the financing 

20
 

of the Company's increased financial interest in Rank Xerox. 
Foreign currency losses from balance sheet translation in the 
Company's Brazilian operations continued to be modest and declined 
somewhat from the 1994 third quarter.  This decline was offset 
somewhat by increased losses in other Latin American operations, 
primarily in Colombia.  In the 1995 first half a reduction of 
year-over-year losses from balance sheet translation was primarily 
due to a lower rate of net currency devaluation in Brazil.   
 

Income Taxes, Equity in Net Income of Unconsolidated Affiliates 
and Minorities' Interests in the Earnings of Subsidiaries

Income before income taxes, equity in net income of unconsolidated 
affiliates and minorities' interests increased 20 percent to $415 
million in the 1995 third quarter from $346 million in the 1994 
third quarter.  For the 1995 first nine months, this income 
increased 30 percent to $1,194 million from $918 million in the 
1994 first nine months.  The excellent profit growth in the third 
quarter and the first nine months reflects the benefits from 
productivity initiatives and was particularly influenced by 
substantial profit growth in the Company's Brazilian operations.

The effective tax rate was 38.6 percent in the 1995 third quarter 
compared with 39.3 percent in the 1994 third quarter, and 39.3 
percent in the 1994 full year.  In the 1995 first nine months, the 
effective tax rate was 38.7 percent.

Equity in the net income of unconsolidated affiliates, principally 
Fuji Xerox, increased in the 1995 third quarter to $38 million 
from $25 million in the 1994 third quarter.  This equity in net 
income was $102 million in the 1995 first nine months compared 
with $63 million in the 1994 first nine months.  The increase in 
Fuji Xerox income in the third quarter and the first nine months 
was due to revenue growth in their domestic market and currency 
translation.

Minorities' interests in the earnings of subsidiaries was $37 
million in the 1995 third quarter compared with $50 million in the 
1994 third quarter, and was $137 million for the 1995 first nine 
months, equal to the 1994 first nine months.  The decrease in the 
third quarter was due to the Company's increased financial 
interest in Rank Xerox partially offset by excellent growth in 
Rank Xerox income.  For the first nine months, the decrease due to 
the Company's increased financial interest in Rank Xerox was 
offset by excellent growth in Rank Xerox income.  

   
On February 28, 1995, Xerox increased its financial interest in 
Rank Xerox to 80 percent from 67 percent.  This transaction 
reduced third quarter and the first nine months minorities' 
interest by approximately $25 million and $64 million, 
respectively.     

21
 



Income

Income in the 1995 third quarter was $256 million, a growth of 38 
percent compared with the 1994 third quarter.  For the 1995 first 
nine months, income was $697 million, a growth of 44 percent from 
the $483 million of income in the 1994 first nine months. 

The 1995 third quarter Document Processing primary earnings per 
share increased 38 percent to $2.21 and the 1995 first nine months 
primary earnings per share increased 52 percent to $6.02. Fully 
diluted earnings per share increased 37 percent to $2.09 in the 
1995 third quarter and by 49 percent in the 1995 first nine months 
to $5.72. 


Rank Xerox and Latin American Fiscal-Year Change in 1995

Effective January 1, 1995, the Company changed Rank Xerox and 
Latin American operations to calendar-year financial reporting.  
The 1994 fiscal year ended on October 31 for Rank Xerox and on 
November 30 for Latin American operations.  The results of these 
non-U.S. operations that occurred between the 1994 and 1995 fiscal 
years (the stub period) were accounted for as a direct charge to 
equity. A loss of $21 million was charged to equity in the stub 
period, primarily due to the currency devaluation and related 
economic dislocations in Mexico.  Excluding the Mexican 
devaluation and related economic dislocations, income during the 
stub period was $4 million.

22
 



			     Insurance

Insurance Operating Results

The results of Insurance and Other Financial Services ("IOFS") are 
separated into the continuing Insurance segment and discontinued 
operations, which include Other Financial Services ("OFS"), 
(discontinued in 1993) and third-party financing and real-estate 
development (discontinued in 1990).  The Insurance segment 
includes Talegen Holdings, Inc. ("Talegen"), Ridge Reinsurance 
Limited ("Ridge Re") and that portion of Xerox Financial Services, 
Inc. ("XFSI") interest expense and other costs associated with the 
continuing business activities.  The Constitution Re Corporation 
("Constitution Re") sale to EXOR America Inc. ("EXOR") was 
completed on April 26, 1995 for a cash sale price of $421 million.  
The transaction resulted in a net loss of approximately $7 
million. On July 18, 1995 Xerox completed the sale of Viking 
Insurance Holdings, Inc., a Talegen subsidiary, to Guaranty 
National Corporation ("GNC") for approximately $103 million in 
cash plus future upward price adjustments based on loss reserve 
development.  The transaction approximated book value. On August 
31, 1995, Xerox completed the sale of First Quadrant Corporation's 
insurance investment management segment to American Re Asset 
Management, Inc. ("ARAM"), a subsidiary of American Re 
Corporation. Net proceeds from the sales of Constitution Re to 
EXOR, Viking to GNC and First Quadrant insurance segment to ARAM 
have largely been used to pay down debt and are in line with the 
Company's previously announced strategy to disengage from 
financial services and redeploy capital into its more profitable 
document processing business.  Talegen continues to own Crum & 
Forster Holdings, Inc., Industrial Indemnity Holdings, Inc., 
Coregis Group, Inc., Westchester Specialty Group, Inc., The 
Resolution Group, Inc. and three service companies (which, 
including Talegen, are referred to as the "Remaining Companies"). 
 
Income after-tax from the Insurance segment was a $20 million loss 
in the third quarter, 1995, compared with a $1 million profit in 
the third quarter, 1994.  For the first nine months, 1995, income 
after-tax was a $76 million loss compared to break even in the 
first nine months, 1994.  Third quarter and first nine months 
results are summarized in the following table.

					    Third Quarter      Nine Months
(In millions)                              1995      1994    1995      1994
Talegen Remaining Companies                $ 46      $ 38    $124 *    $101
Monsanto Settlement (Holding Co. Portion)     -         -     (14)*       -
Talegen Dispositioned Companies               4        13      (3)       33
   Total Talegen                             50        51     107       134
Cessions To Ridge Re                        (22)      (11)    (56)*     (17)
Interest/Other                              (48)      (39)   (127)     (117)
   Total Insurance                         $(20)     $  1    $(76)*    $  -

23
 


* The first nine months, 1995, includes the $22 million after-tax 
impact of the March 2, 1995 settlement between Monsanto Company 
and Talegen and four of its insurance subsidiaries ($1 million in 
Remaining Companies, $14 million at the holding company level and 
$7 million in cessions to Ridge Re).

The Remaining Companies had after-tax income of $46 million in the 
third quarter, 1995, compared with $38 million in the third 
quarter, 1994.  For the first nine months, 1995, after-tax income 
totaled $124 million compared with $101 million in the first nine 
months, 1994. The year-over-year improvements in both the third 
quarter and year-to-date are due to generally improved 
underwriting results, higher investment income and higher net 
realized capital gains, partially offset by higher catastrophe 
losses and interest expense related to the $425 million in debt 
issued in the fourth quarter, 1994.  

Revenues from the Insurance businesses were $570 million in the 
third quarter, 1995, a decline of 14 percent from the third 
quarter, 1994. Revenues for the first nine months, 1995, totaled 
$1,834 million, a 10 percent decline from the first nine months, 
1994. The lower revenues in both the third quarter and first nine 
months 1995 reflect the absence of 1995 earned premium volumes for 
Constitution Re and Viking subsequent to their sales.  For the 
Remaining Companies, year-over-year earned premiums increased in 
the third quarter and were approximately flat for the nine months.  
Further details on premium levels are included in the individual 
Talegen insurance operating group results.

The overall underwriting loss for the Remaining Companies in the 
third quarter, 1995, increased by $10 million to $49 million, 
compared with $39 million in the third quarter, 1994. The increase 
in the third quarter 1995 includes approximately $11 million 
after-tax impact for catastrophe losses associated with Hurricanes 
Erin and Marilyn compared to nominal catastrophe losses in the 
prior year period.  For the first nine months, the underwriting 
loss improved by $2 million to $126 million. The nine month 
improvement in 1995 primarily reflects more favorable loss 
experience in certain insurance operating groups on current and 
prior years' business and continuing overall expense controls, 
partially offset by higher catastrophe losses.

Third quarter, 1995, underwriting results include cessions to 
Ridge Re (a wholly owned subsidiary of XFSI that provides 
reinsurance coverage to current and former Talegen Insurance 
Operating Groups) of $33 million pre-tax ($22 million after-tax) 
of adverse development related to 1992 and prior accident years.  
For the first nine months, 1995, cessions total $86 million pre-
tax ($56 million after-tax).  Cessions to Ridge Re in 1994 totaled 
$16 million pre-tax ($11 million after-tax) for the third quarter 
and $25 million pre-tax ($17 million after-tax) for the first nine 
months.

24
 

Pre-tax catastrophe losses for the Remaining Companies were 
approximately $17 million in the third quarter, 1995, compared 
with approximately $1 million in the third quarter, 1994. For the 
first nine months, 1995 losses totaled $26 million compared with 
$19 million in the first nine months, 1994. The increase in the 
third quarter reflects losses related to Hurricanes Erin and 
Marilyn, while the year-to-date increase reflects the impact of 
heavier storm activity in the Midwest and the aforementioned 
hurricanes compared with the Northridge earthquake in California 
and Northeast winter storms in 1994.

Underwriting results (expressed in terms of gross written premiums 
and combined ratios) and after-tax income for each of Talegen's 
four ongoing insurance operating groups included in the Remaining 
Companies results are summarized in the following table.  
Underwriting results for The Resolution Group are not meaningful 
on this basis since that unit has insignificant run-off premiums 
and, therefore, are not displayed.


			    Gross                    Combined      After-Tax
			    Premiums    Growth         Ratio        Income  
($ in millions)             Written       %       1995     1994   1995  1994
Third Quarter
Coregis                     $ 155          5%     105.0   102.1   $10    $ 8
Crum & Forster Insurance      318         29      108.8   105.7    43     20
Industrial Indemnity           73        (21)     104.5    98.2     8     13
Westchester Specialty Group    77        (13)     117.8   106.7     5      8

Nine Months
Coregis                     $ 322         10%     101.4   105.8   $30    $16
Crum & Forster Insurance      870         16      109.1   107.0    77     47
Industrial Indemnity          230        (23)     107.5   106.9    16     27
Westchester Specialty Group   224        (14)     115.1   106.9    17     20


The combined ratio is a standard insurance industry measurement of 
underwriting results.  It measures the relationship of losses and 
expenses to net earned premiums.  It does not include income from 
an insurer's investments.  The combined ratio is the sum of three 
ratios: (i) the loss and loss adjustment expense ratio, (ii) the 
underwriting expense ratio and (iii) the dividend ratio.  The loss 
and loss adjustment expense ratio reflects claims expenses, the 
underwriting expense ratio reflects policy acquisition and 
administrative costs, and the dividend ratio reflects dividends to 
policyholders.  The objective of the combined ratio is to match 
costs with revenues.  Generally, a combined ratio under 100 
percent indicates underwriting profits while a combined ratio 
exceeding 100 percent indicates underwriting losses. 

The following are the key reasons for the year-over-year 
performance changes for each Insurance Operating Group. 

25
 

At Coregis, strong program management disciplines resulted in 
gross written premium growth of 5 percent for the quarter and 10 
percent for nine months as good renewal retentions and expansion 
in various core programs continued.  The combined ratio increased 
2.9 points to 105.0 for the quarter, but decreased 4.4 points to 
101.4 for nine months.  Improved loss experience in 1995 was 
partially offset by higher operating expenses in the third 
quarter.  Net income increased $2 million for the quarter and $14 
million for the nine months due to increased production, improved 
loss experience, and higher net investment income and net realized 
capital gains.  These positive impacts were partially offset by 
interest expense on debt issued in the fourth quarter of 1994.

Crum & Forster Insurance continued to achieve new business 
expansion and strong renewal retentions with the company's custom 
agents as reflected in gross written premium growth of 29 percent 
for the third quarter and 16 percent for nine months.  The 
combined ratio increased 3.1 points for the quarter to 108.8 and 
2.1 points to 109.1 for the nine months primarily due to loss 
funding on prior years' business.  Net income increased $23 
million for the quarter and $30 million year-to-date reflecting 
higher net investment income and net realized capital gains, 
partially offset by interest expense on debt issued in the fourth 
quarter of 1994.   

At Industrial Indemnity gross premium volume declined 21 percent 
for the quarter and 23 percent for the first nine months due to 
the continued competitive open rating environment for workers 
compensation business in California, the company's largest market.  
The combined ratio was 104.5 for the third quarter, a favorable 
result, although 6.3 points higher than the prior year period due 
to the release of loss reserves in 1994. The year-to-date combined 
ratio was 107.5, or 0.6 point higher than the first nine months of 
1994 due to reserve releases.  The lower production in California 
and interest expense on debt issued in the fourth quarter of 1994 
contributed to decreases of $5 million in net income for the 
quarter and $11 million for the nine months.   

Gross premium volume at Westchester Specialty declined 13 percent 
for the third quarter and 14 percent for nine months. Continuing 
the trend of recent quarters, casualty business declined due to 
market pressure on prices and related exposure reductions, while 
premiums grew in profitable property business.  The company has 
strengthened its loss funding for casualty business causing the 
combined ratio to increase 11.1 points for the quarter to 117.8 
and 8.2 points for the nine months to 115.1.  The effects of 
higher loss funding and interest expense on debt issued in the 
fourth quarter of 1994 were largely offset by improved net 
investment income and net realized capital gains, resulting in a 
$3 million decline in net income for the quarter and nine months. 

The Resolution Group's combined ratio is not meaningful due to the 
absence of new and renewal business.  In addition, gross premium 

26
 

volume continues to be insignificant and represents the run-off of 
discontinued business.  Net income was minimal.

Investment income for Talegen Remaining Companies was $100 million 
in the third quarter, 1995, compared with $91 million in the third 
quarter, 1994. For the first nine months, 1995, investment income 
was $297 million compared with $261 million in the first nine 
months, 1994. The increase in 1995 investment income primarily 
reflects a higher level of invested assets and higher yields.

Realized pre-tax capital gains for Talegen Remaining Companies 
totaled $33 million in the third quarter, 1995, compared to $4 
million in the third quarter, 1994.  For the first nine months, 
1995, gains totaled $46 million compared to $14 million in the 
first nine months, 1994.  The third quarter, 1995 capital gains 
included the impact from repositioning the Remaining Companies 
portfolios.


Property and Casualty Operating Trends
 
The industry's profitability can be significantly affected by 
cyclical competitive conditions, as well as, by volatile and 
unpredictable developments, including changes in the propensity of 
courts to grant large awards, fluctuations in interest rates and 
other changes in the investment environment (which affect market 
prices of insurance companies' investments, the income from those 
investments and inflationary pressures that may tend to affect the 
size of losses), and judicial decisions affecting insurers' 
liabilities.  Talegen's operating results have historically been 
influenced by these industry trends, as well as, by Talegen's 
exposure to uncollectible reinsurance, which had been greater than 
most other insurers.

Disengagement From Insurance Business

During the disengagement process, the Company will continue to be 
subject to all business risks and rewards of its insurance 
businesses.  The Company anticipates that future income or losses 
from its insurance businesses may vary widely as the disengagement 
strategy is implemented, due to, among other reasons, the 
recognition of proceeds of sales or other forms of disengagement 
and the results from operations of the remaining insurance 
businesses.  No assurances can be given as to the timing of the 
disengagement process, the amount and timing of proceeds of sales 
or other forms of disengagement from insurance units or the impact 
the remaining insurance businesses will have on the Company's 
total results from operations during the disengagement process.

The Company's objective is to continue to obtain value from the 
Insurance investments.  The ultimate value will depend on 
the success of the operational improvements, timing, the level of 
interest rates, and the relative values of insurance properties, 
and a sizable charge to income could occur.


27
 

Talegen Reserves

The methodologies for establishing reserves for unpaid losses and 
loss expenses and reserves for uncollectible reinsurance are 
discussed in the Company's Form 10-K.  The following table sets 
forth gross unpaid losses and loss expenses, reinsurance 
recoverables on unpaid losses and loss expenses and the resultant 
net unpaid losses and loss expenses for the insurance companies 
within the Remaining Companies as of September 30, 1995 and 
December 31, 1994:

Unpaid Losses and Loss Expenses

			     September 30, 1995          December 31, 1994
				 Reinsurance                Reinsurance
			    Gross  Recover-  Net      Gross   Recover-  Net
($ in millions)           Reserves   ables  Reserves  Reserves ables  Reserves

Coregis                     $1,040  $  281   $  759   $  995    $271   $  724
Crum & Forster Insurance     2,954     788    2,166    2,941     768    2,173
Industrial Indemnity         1,324     180    1,144    1,445     188    1,257
The Resolution Group         1,629   1,002      627    1,680     983      697
Westchester Specialty Group  1,220     485      735    1,225     485      740
Ceded balances to affiliates  (456)   (456)       -     (451)   (451)       -
Total                       $7,711  $2,280   $5,431   $7,835  $2,244   $5,591

Memo Item:  
1)      Included in the above reinsurance recoverable balances are 
recoverables from Ridge Re of $139 million and $53 million at 
September 30, 1995 and December 31, 1994, respectively.

The changes in gross reserves over the nine months ending 
September 30, 1995 represent reserves established for premiums 
earned during the nine month period offset by claim and loss 
expense payments made.   Additionally, insurance companies within 
Crum & Forster Insurance, Westchester Specialty Group and The 
Resolution Group strengthened gross reserves for development on 
1994 and prior accident year claims, by $48 million, $45 million 
and $34 million, respectively, whereas insurance companies within 
Coregis and Industrial Indemnity reduced gross reserves by $20 
million and $5 million, respectively.  Of the reserve 
strengthening amounts, $26 million, $31 million and $29 million, 
respectively,  were ceded to Ridge Re.  Cessions to Ridge Re, 
while beneficial to Talegen, do not result in a benefit to the 
Insurance Segment or consolidated Xerox accounts.  

The Company's Form 10-K discusses the complexity and uncertainty 
pertaining to claims resulting from asbestos bodily injury, 
asbestos-in-building, hazardous waste and other latent or long-
tail losses, and provides a discussion on what Talegen and the 
insurance operating groups believed to be reasonably possible 
exposure on known claims in these claim categories as of December 
31, 1994.  Talegen continues to gather and analyze developing 

28
 

legal and factual information with regard to claims in these areas 
and makes adjustments to the reserves in the period that the 
related uncertainties are clarified.  Total reserves for asbestos 
bodily injury, asbestos-in-building, hazardous waste and other 
latent or long-tail claims for the insurance companies within the 
Remaining Companies as of September 30, 1995 and December 31, 1994 
are as follows:



Total Reserves (1) by Claim Categories
($ in millions)                   September 30, 1995     December 31, 1994
				     Gross     Net       Gross         Net
Crum & Forster Insurance
   Asbestos Bodily Injury             $ 71     $ 28       $ 58        $ 40
   Asbestos-in-Building                  -        -          -           -
   Hazardous Waste                      62       46         79          61
   Other Latent or Long-Tail Claims     66       44        110          57
     Total                            $199     $118       $247        $158
The Resolution Group
   Asbestos Bodily Injury             $153     $ 12       $170        $ 17
   Asbestos-in-Building                 19        1         21           2
   Hazardous Waste                      83       29        101          36
   Other Latent or Long-Tail Claims     47        4         48           2
     Total                            $302     $ 46       $340        $ 57
Westchester Specialty Group
   Asbestos Bodily Injury             $ 38     $ 11       $ 38        $ 11
   Asbestos-in-Building                 45        1         45           1
   Hazardous Waste                      25       15         34          21
   Other Latent or Long-Tail Claims      9        1          9           1
     Total                            $117     $ 28       $126        $ 34
Total (1)
   Asbestos Bodily Injury             $262     $ 51       $266        $ 68
   Asbestos-in-Building                 64        2         66           3
   Hazardous Waste                     170       90        214         118
   Other Latent or Long-Tail Claims    122       49        167          60
     Total                            $618     $192       $713        $249

(1)  The total excludes $2 million of hazardous waste reserves as of September 
30, 1995 and December 31, 1994 for Coregis Insurance Company, an insurance 
company within the Coregis insurance operating group.  Hazardous waste 
exposures for Coregis are not significant primarily because 1986 was the first 
year significant business volume was written by insurance companies within the
Coregis insurance operating group. 

The reduction in hazardous waste reserves during the nine months 
ended September 30, 1995 primarily results from payments on claims 
and allocated loss adjustment expenses whereas the reduction in 
other latent or long-tail claim reserves is primarily caused by 
claims resolved in connection with the March 2, 1995 Monsanto 
settlement.

29
 


Ridge Re Cessions

Third quarter, 1995, underwriting results include cessions to 
Ridge Re (a wholly owned subsidiary of XFSI that provides 
reinsurance coverage to current and former Talegen Insurance 
Operating Groups) of $33 million pre-tax ($22 million after-tax) 
of adverse loss development related to 1992 and prior accident 
years.  First nine months, 1995, cessions total $86 million pre-
tax ($56 million after-tax) and were from three of the Talegen 
insurers (Crum & Forster Insurance - $17 million, Westchester 
Specialty Group - $20 million and The Resolution Group - $19 
million). Cessions to Ridge Re in the first nine months, 1994 
totaled $25 million pre-tax ($17 million after-tax).

Interest and Other

Interest and other charges on an after-tax basis were $48 million 
in the third quarter, 1995 compared with $39 million in the third 
quarter, 1994.  First nine months, 1995, interest and other 
charges totaled $127 million compared with $117 million in the 
first nine months, 1994.  The increase includes disengagement 
related costs, partially offset by declines in net interest 
expense.
 
During the third quarter, 1995, the Other Postretirement Benefit 
accrual related to employees of the Talegen Remaining Companies 
was reduced by $3 million after-tax as a result of various 
amendments made by the insurance operating groups to their retiree 
medical plans. Through nine months, 1995, the reduction totaled 
$22 million after-tax.

In the third quarter and nine months of 1995, after-tax provisions 
of $3 million and $22 million, respectively, were recorded related 
to disengagement from various Insurance businesses in light of 
uncertainties surrounding the ultimate values to be obtained from 
these operations. 

Discontinued Operations

Other Financial Services (OFS), which were discontinued in the 
fourth quarter of 1993, had no after-tax income in the first nine 
months of 1995 and 1994. The net investment in OFS was $171 
million and $232 million at September 30, 1995 and December 31, 
1994, respectively.  Management currently believes that the 
liquidation of the remaining OFS units will not result in a net 
loss. 

The sale of the business and assets of Shields, a former Furman 
Selz subsidiary, and Regent, a subsidiary of Shields, to Alliance 
Capital Management L. P. was completed in March, 1994.  Under the 
terms of the Furman Selz sales agreement, the sales proceeds 
yielded cash of approximately $60 million before settlement of 
related liabilities.

30
 

On June 1, 1995, XFSI completed the sale of Xerox Financial 
Services Life Insurance Company and related companies ("Xerox Life 
Companies") to a subsidiary of General American Life Insurance 
Company.  After the sale, the Xerox Life Companies names were 
changed to replace the name "Xerox" in the corporate titles with 
the name "Cova" ("Cova Companies").  OakRe Life Insurance Company, 
an XFSI subsidiary formed in 1994, has assumed responsibility for 
existing Single Premium Deferred Annuity (SPDA) policies issued by 
Xerox Life's Missouri and California companies via coinsurance 
agreement ("Coinsurance Agreements"). The Coinsurance Agreements 
include a provision for the assumption (at their election) by the 
Cova Companies, of all of the SPDA policies at the end of their 
current rate reset periods.  A Novation Agreement with an 
affiliate of the new owner provides for the assumption of the 
liability under the Coinsurance Agreements for any SPDA policies 
not so assumed by the Cova Companies.  Other policyholders (of 
Immediate, Whole Life, and Variable annuities as well as a minor 
amount of SPDAs issued by Xerox Life New York) will continue to be 
the responsibility of the Cova Companies.  The sale of Xerox Life 
Companies is part of the Company's strategy to exit the financial 
services business and focus on its core document processing 
business, which was announced in June 1993.

During the first nine months, 1995, sales of real-estate and 
third-party assets and run-off activity reduced assets associated 
with these businesses by $26 million to a total of $521 million.  
Assigned debt increased by $13 million to $244 million. The debt 
increase includes a tax payment made in 1995 relating to the 1994 
sale of a portion of the Direct Financing Lease portfolio, 
partially offset by the run-off related reduction of assets. 
Management believes that the combination of existing reserves 
together with run-off profits should adequately provide for any 
credit losses or losses on disposition.

31
 


Liquidity and Capital Structure

The following table summarizes funds generation and usage for the 
nine months ended September 30, 1995 and 1994 and the related 
impacts on cash and debt balances.  These data exclude restricted 
cash flows of the insurance businesses.

						   Funds Generation/(Use) 
					Year-to-Date September 30,     Better/
(In millions)                                   1995         1994     (Worse)

Non-Financing:
Document Processing                          $  (515)     $  (115)   $  (400)
Rank Xerox Purchase                             (972)           -       (972)
Yen Financing Repayment                            -         (116)       116
IOFS-related/other                               421         (410)       831
Non-Financing                                 (1,066)        (641)      (425)

Financing:
Xerox Equipment Financing                        150         (226)       376
Third-Party Financing                            (10)         126       (136)
Financing                                        140         (100)       240
Operations generation(use)                      (926)        (741)      (185)
Shareholder Dividends                           (292)        (297)         5
Equity issuance/(redemption)
   and changes in cash                            39         (138)       177

Debt(increase)decrease                       $(1,179)     $(1,176)   $    (3)


The following table summarizes Document Processing non-financing 
operations funds generation and usage, after investments in the 
business, for the nine months ended September 30, 1995 and 1994:

						   Funds Generation/(Use)   
					Year-to-Date September 30,     Better/
(In millions)                                   1995         1994     (Worse)

Document Processing
Non-Financing:
Income                                       $   534      $   314    $  220
Depreciation and Amortization                    486          476        10
Restructuring Payments                          (258)        (295)       37
Capital Expenditures                            (295)        (255)      (40)
Assets Sold                                       46          152      (106)
Working Capital/Other                         (1,028)        (507)     (521)
					     $  (515)     $  (115)   $ (400)  


32
 




Capital Resources


In management's opinion, funds usage and debt changes are best 
understood by examining the more highly leveraged financing 
businesses separately from the Company's other businesses.

Non-Financing Businesses

Business Equipment funds usage of $515 million was $400 million 
greater than in the first nine months of 1994 as a result of 
increased profit sharing payments, higher inventory growth, and 
lower asset sales partially offset by higher income. The lower 
asset sales reflect third quarter 1994 sales to EDS.

On February 28, 1995, $972 million was paid to The Rank 
Organisation Plc whereby Xerox increased its financial interest in 
Rank Xerox to about 80 percent from 67 percent.

IOFS-related funds generation was $421 million or $831 million 
better than in 1994 reflecting proceeds from sales of Constitution 
Re, Viking, and Xerox Life and the absence of new debt at Talegen 
compared with 1994.   

Financing Businesses

Xerox Equipment Financing generated $150 million of funds during 
the first nine months of 1995 or $376 million more than in 1994 
resulting from slightly lower penetration rates due to product 
mix,  increased sales in markets which do not participate in our 
financing programs, and a trend toward rentals in the U.S.

Third Party Financing funds usage was $10 million during the first 
nine months of 1995 compared with $126 million of funds generation 
in 1994 due to a tax payment related to certain leveraged-lease 
sales arranged in 1994 and to lower collections on the portfolio 
consistent with the reduction in the asset base.

Total Company Debt

Total debt increased by $1,179 million in the first nine months of 
1995.  This growth is attributable to the purchase of incremental 
interest in Rank Xerox, Business Equipment funds usage, and 
premium payments and related financing payments to Ridge Re 
partially offset by the proceeds from the sales of Constitution Re 
and Viking.

Management believes that the Company has adequate short-term 
credit facilities available to fund its day-to-day operations and 
readily available access to the capital markets to meet any 
longer-term financing requirements.  The Company's domestic 
operations have three revolving credit agreements totaling $5.0 
billion, of which $1.3 billion expires in December 1995 and the 

33
 

remainder in 1999.  In addition, the Company's foreign 
subsidiaries had unused committed lines of credit aggregating $1.9 
billion in various currencies at prevailing interest rates.

The Company's subsidiary, Xerox Financial Services, Inc.(XFSI) has 
agreed to provide support for Talegen in the form of excess of 
loss reinsurance protection through Ridge Reinsurance Limited 
(Ridge Re), XFSI's single-purpose, wholly-owned Bermuda 
reinsurance company.  XFSI is obligated to pay annual installments 
of $49 million in the aggregate each year, plus related financing 
charges, payable for up to ten years, for coverage of $1,245 
million, net of 15 percent coinsurance.  During the first nine 
months of 1995 XFSI paid the required 1995 installment which, 
including the related financing charges, was $81 million.

In addition to XFSI's original contribution of $25 million to the 
capitalization of Ridge Re, XFSI is obligated, under certain 
circumstances to purchase over time additional redeemable 
preferred shares up to a maximum of $301 million.  XFSI has 
guaranteed to the Talegen insurance companies that Ridge Re will 
meet all of its financial obligations under all of the foregoing 
excess of loss reinsurance issued to them.  In addition, the 
Company has guaranteed to the Talegen insurance companies the 
payment by XFSI of all of the required premiums for such excess of 
loss reinsurance to Ridge Re.

Management believes that the funds to meet the foregoing 
obligations will be available from dividends from the earnings of 
the Talegen insurance companies(to the extent permitted under 
insurance laws), proceeds from the sale of all or part of the 
Talegen insurance companies, cash flow from operations and 
borrowings.

Hedging Instruments

Certain financial instruments have been entered into by the 
Company to manage its Document Processing related interest rate 
and foreign currency exposures.  These instruments are held solely 
for hedging purposes and include interest rate swap agreements and 
forward-foreign exchange agreements.  The Company has long-
standing policies prescribing that derivative instruments are only 
to be used to achieve a set of very limited objectives: to lock-in 
the value of cross-border cash flows and to reduce the impact of 
currency and interest rate volatility on costs, assets and 
liabilities.  The Company does not enter into derivative 
instrument transactions for trading purposes.

Currency derivatives are only arranged in conjunction with 
underlying transactions which give rise to foreign currency-
denominated payables and receivables: for example, an option to 
buy foreign currency to settle the importation of goods from 
suppliers, or, a forward exchange contract to fix the rate at 
which a dividend will be paid by a foreign subsidiary.

34
 

The Company does not hedge foreign currency-denominated revenues 
of its foreign subsidiaries since these do not represent cross-
border cash flows.

With regard to interest rate hedging, virtually all customer 
financing assets earn fixed rates of interest and, therefore, the 
Company "locks-in" an interest rate spread by arranging fixed-rate 
liabilities with similar maturities as the underlying assets.  
Additionally, customer financing assets in one currency are 
consistently funded with liabilities in the same currency.  The 
Company refers to the effect of these conservative practices as 
"match funding" its customer financing assets.

More specifically, pay fixed-/receive variable-rate swaps are 
typically used in place of more expensive fixed-rate debt for the 
purpose of match funding fixed-rate, customer contracts.  Pay 
variable-/receive variable-rate swaps are used to transform 
variable-rate medium term debt into commercial paper or local 
currency LIBOR obligations.  Additionally, pay variable-/receive 
fixed-rate swaps are used infrequently to transform longer-term 
fixed-rate debt into commercial paper based rate obligations.  The 
transactions performed within each of these three categories 
enable the Company to manage its interest rate exposures.  The 
potential risk attendant to this strategy is the performance of 
the swap counterparty.  The Company addresses this risk by 
arranging swaps exclusively with a diverse group of strong-credit 
counterparties, regularly monitoring their credit ratings, and 
determining the replacement cost, if any, of existing 
transactions.

The Company's currency and interest rate hedging are typically not 
affected by changes in market conditions as forward contracts, 
options and swaps are normally held to maturity in order to lock-
in currency rates and interest rate spreads on the underlying 
transactions.


35
 

PART II - OTHER INFORMATION



Item 1.  Legal Proceedings

The information set forth under note 12 contained in the "Notes to 
Consolidated Financial Statements" on pages 10 - 13 of this 
Quarterly Report, on Form 10-Q, is incorporated by reference in 
answer to this item.


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


(a)  Exhibit 11  Computation of Net Income per Common Share.

     Exhibit 12  Computation of Ratio of Earnings to Fixed
     Charges.


(b)  No Current Reports on Form 8-K were filed during the quarter 
for which this Quarterly Report is filed.


36
 




			   SIGNATURES


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





					 XEROX CORPORATION
					   (Registrant)




                                      _____________________________
Date: November 9, 1995                 By  Philip D. Fishbach      
				       Vice President and Controller
				      (Principal Accounting Officer)

37