We sponsor various incentive plans for our employees and directors, and for the employees and agents of our subsidiaries that provide for the issuance of stock options, performance shares (performance-vested shares as opposed to time-vested shares), stock appreciation rights (“SARs”), restricted stock units, and restricted stock awards (“nonvested stock”). We have a policy of issuing new shares to satisfy option exercises.

Total compensation expense (in millions) for all of our stock-based incentive compensation plans was as follows:

		For the Years Ended December 31,
		2011		2010		2009
Stock options		$	8	$	5	$	6
Performance shares			2		(1)		(2)
Restricted stock units and nonvested stock			12		12		9
	Total	$	22	$	16	$	13

Recognized tax benefit		$	8	$	6	$	5

Total unrecognized compensation expense (in millions) for all of our stock-based incentive compensation plans was as follows:

				For the Years Ended December 31,
				2011			2010			2009
						Weighted-			Weighted-			Weighted-
						Average			Average			Average
				Expense		Period	Expense		Period	Expense		Period
Stock options				$	6	1.7	$	4	1.8	$	6	1.7
Performance shares					4	2.0		-	-		-	1.0
SARs					1	3.4		1	3.7		2	4.1
Restricted stock units and nonvested
	stock				17	1.7		19	1.9		13	2.2
		Total unrecognized stock-based
			incentive compensation expense	$	28		$	24		$	21

In the first quarter of 2011, a performance period from 2011-2013 was approved for certain of our executive officers by the Compensation Committee. The award for executive officers participating in this performance period consisted of LNC restricted stock units representing approximately 34%, LNC stock options representing approximately 33% and LNC performance shares representing approximately 33% of the total award. LNC stock options granted for this performance period vest ratably over the three-year period, based solely on a service condition. Depending on the performance results for this period, the ultimate payout of performance shares could range from zero to 200% of the target award. Under the 2011-2013 plan, a total of 221,813 LNC restricted stock units, 459,093 LNC stock options and 215,137 LNC performance shares were granted.

In the first quarter of 2010, a performance period from 2010-2012 was approved for certain of our executive officers by the Compensation Committee. The award for executive officers participating in this performance period consisted of LNC stock options representing approximately 34% and LNC restricted stock units representing approximately 66% of the total award. LNC stock options granted for this performance period vest ratably over the three-year period, based solely on a service condition. Under the 2010-2012 plan, a total of 301,524 LNC stock options and 575,353 LNC restricted stock units were granted.

In the first quarter of 2009, a performance period from 2009-2011 was approved for our executive officers by the Compensation Committee. The award for executive officers participating in this performance period consisted of LNC restricted stock units representing approximately 27%, LNC stock options representing approximately 40% and performance cash awards representing approximately 33% of the total award. LNC stock options granted for this performance period vest ratably over the three-year period, based solely on a service condition. Under the 2009-2011 plan, a total of 609,175 LNC stock options and 902,269 LNC restricted stock units were granted.

The option price assumptions used for our stock option incentive plans were as follows:

		For the Years Ended December 31,
		2011			2010			2009
Weighted-average fair value per option granted		$	13.88		$	16.91		$	9.47
Assumptions:
	Dividend yield		1.2	%		1.3	%		1.8	%
	Expected volatility		48.5	%		72.5	%		78.7	%
	Risk-free interest rate		1.4-2.9	%		2.7-3.3	%		1.5-3.2	%
	Expected life (in years)		6.7			6.3			5.8

The fair value of options is determined using a Black-Scholes options valuation model with the assumptions disclosed in the table above. The dividend yield is based on the expected dividend rate during the expected life of the option. Expected volatility is based on the implied volatility of exchange-traded securities and the historical volatility of the LNC stock price. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life of the options granted represents the weighted-average period of time from the grant date to the date of exercise, forfeiture or cancellation based upon historical behavior.

Information with respect to our incentive plans involving stock options with performance conditions (aggregate intrinsic value shown in millions) was as follows:

						Weighted-
			Weighted-			Average
			Average			Remaining	Aggregate
			Exercise		Contractual		Intrinsic
		Shares	Price			Term	Value
Outstanding as of December 31, 2010		1,948,923	$	49.03
Granted - original		95,516		29.97
Exercised (includes shares tendered)		(7,662)		24.15
Forfeited or expired		(187,329)		48.60
	Outstanding as of December 31, 2011	1,849,448	$	48.19		1.09	$	-

Vested or expected to vest as of December 31, 2011⁽¹⁾		1,236,345	$	51.01		1.26	$	-

Exercisable as of December 31, 2011		1,734,930	$	49.46		0.94	$	-

The total fair value of options vested during the years ended December 31, 2011, 2010 and 2009, was $2 million, $9 million and $1 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009, was zero.

Information with respect to our incentive plans involving stock options with service conditions (aggregate intrinsic value shown in millions) was as follows:

						Weighted-
			Weighted-			Average
			Average			Remaining	Aggregate
			Exercise		Contractual		Intrinsic
		Shares	Price			Term	Value
Outstanding as of December 31, 2010		7,755,483	$	47.20
Granted - original		491,653		30.65
Exercised (includes shares tendered)		(24,096)		17.62
Forfeited or expired		(1,572,482)		44.47
	Outstanding as of December 31, 2011	6,650,558	$	46.73		3.66	$	2

Vested or expected to vest as of December 31, 2011⁽¹⁾		6,384,696	$	47.59		3.48	$	1

Exercisable as of December 31, 2011		5,969,616	$	48.95		3.08	$	1

The total fair value of options vested during the years ended December 31, 2011, 2010 and 2009, was $7 million, $4 million and $8 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009, was zero.

				Weighted-
				Average
			Grant-Date
		Shares		Fair Value
Nonvested as of December 31, 2010		210,695		$	42.28
Granted		215,137			31.03
Forfeited		(228,383)			41.41
	Nonvested as of December 31, 2011	197,449		$	31.02

Under our incentive compensation plan, we issue SARs to certain planners and advisors who have full-time contracts with us. The SARs under this program are rights on our stock that are cash settled and become exercisable in increments of 25% over the four-year period following the SARs grant date. SARs are granted with an exercise price equal to the fair market value of our stock at the date of grant and, unless cancelled earlier due to certain terminations of employment, expire five years from the date of grant. Generally, such SARs are transferable only upon death.

We recognize compensation expense for SARs based on the fair value method using the Black-Scholes option-pricing model. Compensation expense and the related liability are recognized on a straight-line basis over the vesting period of the SARs. The SARs liability is marked-to-market through net income, which causes volatility in net income (loss) as a result of changes in the market value of our stock and reported within underwriting, acquisition, insurance and other expenses on our Consolidated Statements of Income (Loss). We have hedged a portion of this volatility by purchasing call options on LNC stock. Call options hedging vested SARs are also marked-to-market through net income. See Note 6 for further information on our call options on LNC stock. The SARs liability as of December 31, 2011, 2010 and 2009, was $1 million and reported within other liabilities on our Consolidated Balance Sheets.

		For the Years Ended December 31,
		2011			2010			2009
Weighted-average fair value per SAR granted		$	9.41		$	7.81		$	12.47
Assumptions:
	Dividend yield		1.9	%		2.4	%		0.2	%
	Expected volatility		39.1	%		38.2	%		106.0	%
	Risk-free interest rate		2.2	%		1.8	%		2.4	%
	Expected life (in years)		5.0			5.0			5.0

The assumptions above are the same as those discussed for options above, except expected volatility is based on the implied volatility of exchange-traded securities and the expected life represents the contractual term.

Information with respect to our SARs plan (aggregate intrinsic value shown in millions) was as follows:

						Weighted-
			Weighted-			Average
			Average			Remaining	Aggregate
			Exercise		Contractual		Intrinsic
		Shares	Price			Term	Value
Outstanding as of December 31, 2010		715,631	$	47.02
Granted - original		106,950		29.97
Exercised (includes shares tendered)		(8,818)		16.53
Forfeited or expired		(142,438)		54.14
	Outstanding as of December 31, 2011	671,325	$	43.26		1.89	$	-

Vested or expected to vest as of December 31, 2011⁽¹⁾		648,545	$	43.78		1.84	$	-

Exercisable as of December 31, 2011		480,041	$	49.44		1.30	$	-

The payment for SARs exercised during the years ended December 31, 2011, 2010 and 2009, was zero.

We award restricted stock units under the incentive compensation plan, generally subject to a three-year vesting period. Information with respect to our restricted stock units was as follows:

				Weighted-
				Average
			Grant-Date
		Shares		Fair Value
Outstanding as of December 31, 2010		1,563,928		$	23.38
Granted		540,394			30.20
Vested		(206,294)			33.36
Forfeited		(118,675)			25.09
	Outstanding as of December 31, 2011	1,779,353		$	23.94