Shares and Stockholders' Equity

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements [Abstract]

14. Shares and Stockholders' Equity

Common and Preferred Shares

The changes in our preferred and common stock (number of shares) were as follows:

		For the Years Ended December 31,
		2011	2010	2009
Series A Preferred Stock
Balance as of beginning-of-year		10,914	11,497	11,565
Conversion of convertible preferred stock⁽¹⁾		(842)	(583)	(68)
	Balance as of end-of-year	10,072	10,914	11,497

Series B Preferred Stock
Balance as of beginning-of-year		-	950,000	-
Issuance (redemption) of Series B preferred stock		-	(950,000)	950,000
	Balance as of end-of-year	-	-	950,000

Common Stock
Balance as of beginning-of-year		315,718,554	302,223,281	255,869,859
Stock issued		-	14,137,615	46,000,000
Conversion of convertible preferred stock⁽¹⁾		13,472	9,328	1,088
Stock compensation/issued for benefit plans		248,553	414,712	436,100
Retirement/cancellation of shares		(24,661,357)	(1,066,382)	(83,766)
	Balance as of end-of-year	291,319,222	315,718,554	302,223,281

Common Stock as of End-of-Year
Assuming conversion of preferred stock		291,480,374	315,893,178	302,407,233
Diluted basis		298,225,244	324,043,137	311,846,021

(1) Represents the conversion of Series A preferred stock into common stock.

Our common, Series A and Series B preferred stocks are without par value.

Average Shares

A reconciliation of the denominator (number of shares) in the calculations of basic and diluted earnings (loss) per common share was as follows:

			For the Years Ended December 31,
			2011	2010	2009
Weighted-average shares, as used in basic calculation			307,216,181	310,005,264	280,031,363
Shares to cover exercise of outstanding warrants			10,150,292	12,260,236	6,209,013
Shares to cover conversion of preferred stock			173,289	178,720	184,687
Shares to cover non-vested stock			813,905	616,314	550,700
Average stock options outstanding during the year			636,989	707,704	401,369
Assumed acquisition of shares with assumed
	proceeds from exercising outstanding warrants		(4,658,020)	(5,148,473)	(2,945,429)
Assumed acquisition of shares with assumed
	proceeds and benefits from exercising stock
	options (at average market price for the year)		(427,425)	(464,813)	(275,543)
Shares repurchaseable from measured but
	unrecognized stock option expense		(65,882)	(139,673)	(85,511)
Average deferred compensation shares			1,110,722	1,198,468	1,564,954
		Weighted-average shares, as used in diluted calculation	314,950,051	319,213,747	285,635,603

In the event the average market price of LNC common stock exceeds the issue price of stock options and the options have a dilutive effect to our EPS, such options will be shown in the table above. As a result of a loss from continuing operations for the year ended December 31, 2009, shares used in the EPS calculation represent basic shares, since using diluted shares would have been anti-dilutive to the calculation.

The income used in the calculation of our diluted EPS is our net income (loss), reduced by preferred stock dividends and accretion of discount. These amounts are presented on our Consolidated Statements of Income (Loss).

We have participants in our deferred compensation plans who selected LNC stock as the measure for the investment return attributable to their deferral amounts. For the years ended December 31, 2011 and 2010, the effect of settling this obligation in LNC stock (“equity classification”) was more dilutive than the scenario of settling it in cash (“liability classification”). Therefore, for our EPS calculation for these periods, we added these shares to the denominator and adjusted the numerator to present net income as if the shares had been accounted for under equity classification by removing the mark-to-market adjustment included in net income attributable to these deferred units of LNC stock. The amount of this adjustment was $4 million and $1 million for the years ended December 31, 2011 and 2010, respectively.

As of December 31, 2011, we had 10,150,292 outstanding warrants. The warrants, each representing the right to purchase one share of our common stock, no par value per share, have an exercise price of $10.85, and expire on July 10, 2019, and are listed on the New York Stock Exchange under the symbol “LNC WS.”

Accumulated OCI

The following summarizes the components and changes in accumulated OCI (in millions):

				For the Years Ended December 31,
				2011		2010		2009
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year				$	1,072	$	49	$	(2,654)
	Cumulative effect from adoption of new accounting standards				-		181		(84)
	Unrealized holding gains (losses) arising during the year				3,414		2,528		6,204
	Change in foreign currency exchange rate adjustment				(5)		(6)		26
	Change in DAC, VOBA, DSI and other contract holder funds				(993)		(1,196)		(2,371)
	Income tax benefit (expense)				(864)		(478)		(1,366)
	Less:
		Reclassification adjustment for gains (losses) included in net income (loss)			(129)		(135)		(569)
		Reclassification adjustment for gains (losses) on derivatives included in net income (loss)			-		135		(45)
		Associated amortization of DAC, VOBA, DSI and DFEL			(13)		9		161
		Income tax benefit (expense)			50		(3)		159
			Balance as of end-of-year	$	2,716	$	1,072	$	49
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year				$	(129)	$	(115)	$	-
	(Increases) attributable to:
		Cumulative effect from adoption of new accounting standards			-		-		(18)
		Gross OTTI recognized in OCI during the year			(58)		(98)		(357)
		Change in DAC, VOBA, DSI and DFEL			11		10		82
		Income tax benefit (expense)			16		30		96
	Decreases attributable to:
		Sales, maturities or other settlements of AFS securities			103		87		154
		Change in DAC, VOBA, DSI and DFEL			(22)		(20)		(29)
		Income tax benefit (expense)			(28)		(23)		(43)
			Balance as of end-of-year	$	(107)	$	(129)	$	(115)
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year				$	(15)	$	11	$	127
	Unrealized holding gains (losses) arising during the year				185		(27)		(120)
	Change in foreign currency exchange rate adjustment				7		4		-
	Change in DAC, VOBA, DSI and DFEL				(1)		(4)		22
	Income tax benefit (expense)				(66)		9		(13)
	Less:
		Reclassification adjustment for gains (losses) included in net income (loss)			(10)		14		8
		Associated amortization of DAC, VOBA, DSI and DFEL			-		(1)		-
		Income tax benefit (expense)			4		(5)		(3)
			Balance as of end-of-year	$	116	$	(15)	$	11
Foreign Currency Translation Adjustment
Balance as of beginning-of-year				$	1	$	3	$	6
	Foreign currency translation adjustment arising during the year				-		(3)		(2)
	Income tax benefit (expense)				-		1		(1)
		Balance as of end-of-year		$	1	$	1	$	3
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year				$	(181)	$	(210)	$	(282)
	Adjustment arising during the year				(149)		45		111
	Income tax benefit (expense)				52		(16)		(39)
		Balance as of end-of-year		$	(278)	$	(181)	$	(210)