Shares and Stockholders' Equity

12 Months Ended

Dec. 31, 2019

Shares and Stockholders' Equity [Abstract]

Shares and Stockholders' Equity

15. Shares and Stockholders’ Equity

Common Shares

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

	For the Years Ended December 31,
	2019		2018		2017
Common Stock
Balance as of beginning-of-year	205,862,760		218,090,114		226,335,105
Stock issued for exercise of warrants	258,633		212,670		344,901
Stock compensation/issued for benefit plans	942,318		800,325		1,793,234
Retirement/cancellation of shares	(10,395,179	)	(13,240,349	)	(10,383,126	)
Balance as of end-of-year	196,668,532		205,862,760		218,090,114
Common Stock as of End-of-Year
Basic basis	196,668,532		205,862,760		218,090,114
Diluted basis	199,196,043		209,034,686		221,309,830

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 Years Ended December 31,
	2019		2018		2017
Weighted-average shares, as used in basic calculation	200,608,737		215,936,448		222,128,687
Shares to cover exercise of outstanding warrants	58,765		568,602		761,353
Shares to cover non-vested stock	973,901		1,534,142		1,626,908
Average stock options outstanding during the year	1,507,049		1,739,029		2,360,372
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(9,594	)	(81,260	)	(109,034	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the year)	(1,033,507	)	(1,074,406	)	(1,414,857	)
Shares repurchasable from measured but
unrecognized stock option expense	(217	)	(14,600	)	(53,241	)
Average deferred compensation shares	-		944,151		920,792
Weighted-average shares, as used in diluted calculation	202,105,134		219,552,106		226,220,980

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 years ended December 31, 2018 and 2017, 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 $18 million and $(7) million for the years ended December 31, 2018 and 2017, respectively.

As of December 31, 2019, we had no outstanding warrants. The remaining outstanding warrants issued in 2009, each representing the right to purchase one share of our common stock, expired on July 10, 2019.

AOCI

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

	For the Years Ended December 31,
	2019			2018			2017
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	557		$	3,486		$	1,784
Cumulative effect from adoption of new accounting standards		-			674			-
Unrealized holding gains (losses) arising during the year		9,267			(6,274	)		3,032
Change in foreign currency exchange rate adjustment		46			(107	)		134
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		(2,462	)		1,748			(705	)
Income tax benefit (expense)		(1,457	)		981			(797	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(28	)		(42	)		(39	)
Associated amortization of DAC, VOBA, DSI and DFEL		(12	)		(20	)		(20	)
Income tax benefit (expense)		8			13			21
Balance as of end-of-year	$	5,983		$	557		$	3,486
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	33		$	44		$	25
(Increases) attributable to:
Cumulative effect from adoption of new accounting standards		-			9			-
Gross OTTI recognized in OCI during the year		(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		31			(19	)		34
Change in DAC, VOBA, DSI and DFEL		(1	)		(6	)		(5	)
Income tax benefit (expense)		(6	)		5			(10	)
Balance as of end-of-year	$	45		$	33		$	44
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	139		$	(29	)	$	49
Cumulative effect from adoption of new accounting standard		-			(6	)		-
Unrealized holding gains (losses) arising during the year		(93	)		144			27
Change in foreign currency exchange rate adjustment		(52	)		111			(137	)
Change in DAC, VOBA, DSI and DFEL		(4	)		(13	)		2
Income tax benefit (expense)		31			(51	)		38
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		42			24			13
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		(2	)		(1	)
Income tax benefit (expense)		(9	)		(5	)		(4	)
Balance as of end-of-year	$	(11	)	$	139		$	(29	)
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(23	)	$	(14	)	$	(27	)
Foreign currency translation adjustment arising during the year		6			(9	)		13
Balance as of end-of-year	$	(17	)	$	(23	)	$	(14	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(299	)	$	(257	)	$	(265	)
Cumulative effect from adoption of new accounting standard		-			(35	)		-
Adjustment arising during the year		(20	)		(12	)		18
Income tax benefit (expense)		(8	)		5			(10	)
Balance as of end-of-year	$	(327	)	$	(299	)	$	(257	)

‎

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 Years Ended December 31,
	2019			2018			2017
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(28	)	$	(42	)	$	(39	)	Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(12	)		(20	)		(20	)	Total realized gain (loss)
Reclassification before income										Income (loss) from continuing
tax benefit (expense)		(40	)		(62	)		(59	)	operations before taxes
Income tax benefit (expense)		8			13			21		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(32	)	$	(49	)	$	(38	)	Net income (loss)
Unrealized OTTI on AFS Securities
Gross reclassification	$	4		$	8		$	5		Total realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		-			-			(1	)	Total realized gain (loss)
Reclassification before income										Income (loss) from continuing
tax benefit (expense)		4			8			4		operations before taxes
Income tax benefit (expense)		(1	)		(2	)		(1	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	3		$	6		$	3		Net income (loss)
Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	3		$	4		$	4		Net investment income
Interest rate contracts		(5	)		(7	)		(18	)	Interest and debt expense
Foreign currency contracts		35			27			18		Net investment income
Foreign currency contracts		9			-			9		Total realized gain (loss)
Total gross reclassifications		42			24			13
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		(2	)		(1	)	Commissions and other expenses
Reclassifications before income										Income (loss) from continuing
tax benefit (expense)		41			22			12		operations before taxes
Income tax benefit (expense)		(9	)		(5	)		(4	)	Federal income tax expense (benefit)
Reclassifications, net of income tax	$	32		$	17		$	8		Net income (loss)