5.	MERCHANDISE TRUSTS

At March 31, 2012, the Company’s merchandise trusts consisted of the following types of assets:

•

Money Market Funds that invest in low risk short term securities;

•

Publicly traded mutual funds that invest in underlying debt securities;

•

Publicly traded mutual funds that invest in underlying equity securities;

•

Equity investments that are currently paying dividends or distributions. These investments include Real Estate Investment Trusts (“REIT’s”), Master Limited Partnerships and global equity securities;

•

Fixed maturity debt securities issued by various corporate entities;

•

Fixed maturity debt securities issued by the U.S. Government and U.S. Government agencies; and

•

Fixed maturity debt securities issued by U.S. states and local government agencies.

All of these investments are classified as Available for Sale as defined by the Investments in Debt and Equity topic of the ASC. Accordingly, all of the assets are carried at fair value. All of these investments are considered to be either Level 1 or Level 2 assets as defined by the Fair Value Measurements and Disclosures topic of the ASC. See Note 15 for further details. There were no Level 3 assets.

The merchandise trusts are variable interest entities (VIE) for which the Company is the primary beneficiary. The assets held in the merchandise trusts are required to be used to purchase the merchandise to which they relate. If the value of these assets falls below the cost of purchasing such merchandise, the Company may be required to fund this shortfall.

The Company has included $7.2 million and $6.9 million of investments held in trust by the West Virginia Funeral Directors Association at March 31, 2012 and December 31, 2011, respectively, in its merchandise trust assets. As required by law, the Company deposits a portion of certain funeral merchandise sales in West Virginia into a trust that is held by the West Virginia Funeral Directors Association. These trusts are recorded at their account value, which approximates fair value.

The cost and market value associated with the assets held in merchandise trusts at March 31, 2012 and December 31, 2011 were as follows:


			Gross		Gross
			Unrealized		Unrealized			Fair
As of March 31, 2012	Cost		Gains		Losses			Value
	(in thousands)

Short-term investments	$	33,340	$	—	$	—		$	33,340
Fixed maturities:
U.S. Government and federal agency		—		—		—			—
U.S. State and local government agency		23		—		—			23
Corporate debt securities		10,414		110		(403	)		10,121
Other debt securities		1,100		—		—			1,100

Total fixed maturities		11,537		110		(403	)		11,244


Mutual funds - debt securities		93,447		1,353		(1,314	)		93,486
Mutual funds - equity securities		127,481		5,325		(5,662	)		127,144

Equity securities		73,823		4,005		(2,836	)		74,992
Other invested assets		7,054		542		—			7,596

Total managed investments	$	346,682	$	11,335	$	(10,215	)	$	347,802


West Virginia Trust Receivable		7,225		—		—			7,225

Total	$	353,907	$	11,335	$	(10,215	)	$	355,027


			Gross		Gross
			Unrealized		Unrealized			Fair
As of December 31, 2011	Cost		Gains		Losses			Value
	(in thousands)

Short-term investments	$	38,312	$	—	$	—		$	38,312
Fixed maturities:
U.S. Government and federal agency		—		—		—			—
U.S. State and local government agency		23		—		—			23
Corporate debt securities		10,537		19		(791	)		9,765
Other debt securities		1,100		—		—			1,100

Total fixed maturities		11,660		19		(791	)		10,888


Mutual funds - debt securities		68,291		1,711		(2,581	)		67,421
Mutual funds - equity securities		148,209		1,939		(8,860	)		141,288

Equity securities		71,760		3,723		(3,131	)		72,352
Other invested assets		7,326		34		—			7,360

Total managed investments	$	345,558	$	7,426	$	(15,363	)	$	337,621


West Virginia Trust Receivable		6,894		—		—			6,894

Total	$	352,452	$	7,426	$	(15,363	)	$	344,515

The contractual maturities of debt securities as of March 31, 2012 are as follows:


As of March 31, 2012	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
	(in thousands)

U.S. Government and federal agency	$	—	$	—	$	—	$	—
U.S. State and local government agency		23		—		—		—
Corporate debt securities		—		8,945		1,176		—
Other debt securities		1,100		—		—		—

Total fixed maturities	$	1,123	$	8,945	$	1,176	$	—

An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at March 31, 2012 and December 31, 2011 is presented below:


	Less than 12 months				12 Months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
As of March 31, 2012	Value		Losses		Value		Losses		Value		Losses
	(in thousands)

Fixed maturities:
U.S. Government and federal agency	$	—	$	—	$	—	$	—	$	—	$	—
U.S. State and local government agency		—		—		—		—		—		—
Corporate debt securities		1,799		102		4,299		301		6,098		403
Other debt securities		—		—		—		—		—		—

Total fixed maturities		1,799		102		4,299		301		6,098		403


Mutual funds - debt securites		29,666		482		36,687		832		66,353		1,314
Mutual funds - equity securites		11,049		1,301		61,383		4,361		72,432		5,662

Equity securities		21,862		1,283		9,158		1,553		31,020		2,836
Other invested assets		—		—		—		—		—		—

Total	$	64,376	$	3,168	$	111,527	$	7,047	$	175,903	$	10,215


	Less than 12 months				12 Months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
As of December 31, 2011	Value		Losses		Value		Losses		Value		Losses
	(in thousands)

Fixed maturities:
U.S. Government and federal agency	$	—	$	—	$	—	$	—	$	—	$	—
U.S. State and local government agency		—		—		—		—		—		—
Corporate debt securities		4,007		351		4,459		440		8,466		791
Other debt securities		—		—		—		—		—		—

Total fixed maturities		4,007		351		4,459		440		8,466		791


Mutual funds - debt securites		19,691		1,109		31,916		1,472		51,607		2,581
Mutual funds - equity securites		32,631		970		59,010		7,890		91,641		8,860

Equity securities		20,349		1,941		5,775		1,190		26,124		3,131
Other invested assets		—		—		—		—		—		—

Total	$	76,678	$	4,371	$	101,160	$	10,992	$	177,838	$	15,363

A reconciliation of the Company’s merchandise trust activities for the three months ended March 31, 2012 is presented below:


Fair Value @ 12/31/2011		Contributions		Distributions			Interest/ Dividends		Capital Gain Distributions		Realized Gain/ Loss		Taxes		Fees			Unrealized Change in Fair Value		Fair Value @ 3/31/2012
(in thousands)
$	344,515		13,516		(19,037	)		3,977		88		3,388		64		(541	)		9,057	$	355,027

The Company made net distributions from the trusts of approximately $5.5 million during the three months ended March 31, 2012. During the three months ended March 31, 2012, purchases and sales of securities available for sale included in trust investments were approximately $104.6 million and $103.9 million, respectively. Distributions included $5.8 million of assets that were divested as a result of the termination of an operating agreement during the three months ended March 31, 2012.

Other-than-temporary Impairments of Trust Assets

During the three months ended March 31, 2012 and 2011, the Company determined that there were no other than temporary impairments to the investment portfolio in the merchandise trusts.