Shares and Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Shares and Stockholders' Equity [Abstract]

13. Shares and Stockholders’ Equity

Common Shares

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



	For the Three				For the Nine
	Months Ended				Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Common Stock
Balance as of beginning-of-period	200,775,731		217,294,051		205,862,760		218,090,114
Stock issued for exercise of warrants	36,610		97,076		258,633		119,942
Stock compensation/issued for benefit plans	41,006		38,642		934,081		675,608
Retirement/cancellation of shares	(2,526,097	)	(2,652,963	)	(8,728,224	)	(4,108,858	)
Balance as of end-of-period	198,327,250		214,776,806		198,327,250		214,776,806

Common Stock as of End-of-Period
Basic basis	198,327,250		214,776,806		198,327,250		214,776,806
Diluted basis	200,724,744		217,390,897		200,724,744		217,390,897

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				For the Nine
	Months Ended				Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Weighted-average shares, as used in basic calculation	199,200,811		215,901,268		201,644,591		217,413,480
Shares to cover exercise of outstanding warrants	4,033		579,882		78,353		620,580
Shares to cover non-vested stock	935,823		1,467,953		938,920		1,512,297
Average stock options outstanding during the period	1,443,508		1,700,026		1,536,738		1,807,340
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(588	)	(86,040	)	(12,791	)	(86,335	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(988,853	)	(1,082,651	)	(1,050,065	)	(1,090,868	)
Shares repurchasable from measured but
unrecognized stock option expense	-		(11,209	)	(289	)	(17,381	)
Average deferred compensation shares	966,444		-		-		936,355
Weighted-average shares, as used in diluted calculation ⁽¹⁾	201,561,178		218,469,229		203,135,457		221,095,468

⁽¹⁾Due to reporting a net loss for the three months ended September 30, 2019, basic shares were used in the diluted earnings per share (“EPS”) calculation for that period as the use of diluted shares would have resulted in a lower loss per share.

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.

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 September 30, 2019 and the nine months ended September 30, 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 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 $3 million for the three months ended September 30, 2019 and $6 million for the nine months ended September 30, 2018.

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AOCI

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



	For the Nine
	Months Ended
	September 30,
	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		9,849			(5,520	)
Change in foreign currency exchange rate adjustment		(80	)		(68	)
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		(2,271	)		1,538
Income tax benefit (expense)		(1,596	)		858
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(18	)		(35	)
Associated amortization of DAC, VOBA, DSI and DFEL		(11	)		(15	)
Income tax benefit (expense)		6			11
Balance as of end-of-period	$	6,482		$	1,007
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)		3			-
Decreases attributable to:
Changes in fair value, sales, maturities or other settlements of AFS securities		21			(8	)
Change in DAC, VOBA, DSI and DFEL		(2	)		(10	)
Income tax benefit (expense)		(4	)		4
Balance as of end-of-period	$	36		$	39
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		(152	)		98
Change in foreign currency exchange rate adjustment		80			69
Change in DAC, VOBA, DSI and DFEL		(3	)		8
Income tax benefit (expense)		15			(37	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		34			15
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		(1	)
Income tax benefit (expense)		(7	)		(3	)
Balance as of end-of-period	$	53		$	92
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(23	)	$	(14	)
Foreign currency translation adjustment arising during the period		(5	)		(6	)
Balance as of end-of-period	$	(28	)	$	(20	)
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		4			10
Balance as of end-of-period	$	(295	)	$	(282	)

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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 Nine
	Months Ended
	September 30,
	2019			2018

Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(18	)	$	(35	)	Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(11	)		(15	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		(29	)		(50	)	operations before taxes
Income tax benefit (expense)		6			11		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(23	)	$	(39	)	Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	4		$	(1	)	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)		4			(1	)	operations before taxes
Income tax benefit (expense)		(1	)		-		Federal income tax expense (benefit)
Reclassification, net of income tax	$	3		$	(1	)	Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	2		$	3		Net investment income
Interest rate contracts		(2	)		(6	)	Interest and debt expense
Foreign currency contracts		25			18		Net investment income
Foreign currency contracts		9			-		Total realized gain (loss)
Total gross reclassifications		34			15
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		(1	)	Commissions and other expenses
Reclassifications before income							Income (loss) from continuing
tax benefit (expense)		33			14		operations before taxes
Income tax benefit (expense)		(7	)		(3	)	Federal income tax expense (benefit)
Reclassifications, net of income tax	$	26		$	11		Net income (loss)