12. Shares and Stockholders’ Equity

Common Shares

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



	For the Three
	Months Ended
	March 31,
	2019		2018
Common Stock
Balance as of beginning-of-year	205,862,760		218,090,114
Stock issued for exercise of warrants	203,530		20,040
Stock compensation/issued for benefit plans	809,670		585,322
Retirement/cancellation of shares	(3,888,731	)	-
Balance as of end-of-period	202,987,229		218,695,476

Common Stock as of End-of-Period
Basic basis	202,987,229		218,695,476
Diluted basis	204,200,031		222,379,443

Our common stock is 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 Three
	Months Ended
	March 31,
	2019		2018
Weighted-average shares, as used in basic calculation	204,290,759		218,368,994
Shares to cover exercise of outstanding warrants	173,837		642,787
Shares to cover non-vested stock	1,049,556		1,592,959
Average stock options outstanding during the period	1,519,184		1,969,591
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(29,176	)	(81,088	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(1,041,630	)	(1,103,154	)
Shares repurchasable from measured but
unrecognized stock option expense	(867	)	(24,578	)
Average deferred compensation shares	-		922,061
Weighted-average shares, as used in diluted calculation	205,961,663		222,287,572

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 earnings per share (“EPS”), such options will be shown in the table above.

We have participants in our deferred compensation plans who selected LNC stock as the measure for the investment return attributable to all or a portion of their deferral amounts. For the three months ended March 31, 2018, the effect of settling this obligation in LNC stock (“equity classification”) was more dilutive than the scenario of settling in cash (“liability classification”). Therefore, for our EPS calculation for this period, 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 $2 million for the three months ended March 31, 2018.

AOCI

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



	For the Three
	Months Ended
	March 31,
	2019			2018
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	557		$	3,486
Cumulative effect from adoption of new accounting standards		-			674
Unrealized holding gains (losses) arising during the period		3,556			(3,063	)
Change in foreign currency exchange rate adjustment		14			52
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		(928	)		958
Income tax benefit (expense)		(563	)		432
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(15	)		(18	)
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		(4	)
Income tax benefit (expense)		3			5
Balance as of end-of-period	$	2,649		$	2,556
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	33		$	44
(Increases) attributable to:
Cumulative effect from adoption of new accounting standards		-			9
Gross OTTI recognized in OCI during the period		(16	)		-
Change in DAC, VOBA, DSI and DFEL		1			-
Income tax benefit (expense)		4			-
Decreases attributable to:
Changes in fair value, sales, maturities or other settlements of AFS securities		6			(9	)
Change in DAC, VOBA, DSI and DFEL		(2	)		(10	)
Income tax benefit (expense)		(1	)		4
Balance as of end-of-period	$	25		$	38
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	139		$	(29	)
Cumulative effect from adoption of new accounting standard		-			(6	)
Unrealized holding gains (losses) arising during the period		(36	)		16
Change in foreign currency exchange rate adjustment		(14	)		(50	)
Change in DAC, VOBA, DSI and DFEL		6			4
Income tax benefit (expense)		10			7
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		8			3
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		(1	)
Income tax benefit (expense)		(1	)		-
Balance as of end-of-period	$	99		$	(60	)
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(23	)	$	(14	)
Foreign currency translation adjustment arising during the period		3			5
Balance as of end-of-period	$	(20	)	$	(9	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(299	)	$	(257	)
Cumulative effect from adoption of new accounting standard		-			(35	)
Adjustment arising during the period		(1	)		-
Balance as of end-of-period	$	(300	)	$	(292	)

The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):



	For the Three
	Months Ended
	March 31,
	2019			2018

Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(15	)	$	(18	)	Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		(4	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		(16	)		(22	)	operations before taxes
Income tax benefit (expense)		3			5		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(13	)	$	(17	)	Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	-		$	-		Total realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		-			-		Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		-			-		operations before taxes
Income tax benefit (expense)		-			-		Federal income tax expense (benefit)
Reclassification, net of income tax	$	-		$	-		Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	1		$	1		Net investment income
Interest rate contracts		(1	)		(3	)	Interest and debt expense
Foreign currency contracts		7			5		Net investment income
Foreign currency contracts		1			-		Total realized gain (loss)
Total gross reclassifications		8			3
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		(1	)	Commissions and other expenses
Reclassifications before income							Income (loss) from continuing
tax benefit (expense)		7			2		operations before taxes
Income tax benefit (expense)		(1	)		-		Federal income tax expense (benefit)
Reclassifications, net of income tax	$	6		$	2		Net income (loss)