Shares and Stockholders' Equity

3 Months Ended

Mar. 31, 2020

Shares and Stockholders' Equity [Abstract]

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,
	2020		2019
Common Stock
Balance as of beginning-of-year	196,668,532		205,862,760
Stock issued for exercise of warrants	-		203,530
Stock compensation/issued for benefit plans	349,636		809,670
Retirement/cancellation of shares	(3,809,924	)	(3,888,731	)
Balance as of end-of-period	193,208,244		202,987,229

Common Stock as of End-of-Period
Basic basis	193,208,244		202,987,229
Diluted basis	195,027,909		204,200,031

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,
	2020		2019
Weighted-average shares, as used in basic calculation	195,076,797		204,290,759
Shares to cover exercise of outstanding warrants	-		173,837
Shares to cover non-vested stock	853,597		1,049,556
Average stock options outstanding during the period	996,248		1,519,184
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	-		(29,176	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(703,600	)	(1,041,630	)
Shares repurchasable from measured but
unrecognized stock option expense	-		(867	)
Average deferred compensation shares	1,041,800		-
Weighted-average shares, as used in diluted calculation	197,264,842		205,961,663

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, 2020, 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 $23 million for the three months ended March 31, 2020.

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AOCI

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




	For the Three
	Months Ended
	March 31,
	2020			2019
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	5,983		$	557
Cumulative effect from adoption of new accounting standard		45			-
Unrealized holding gains (losses) arising during the period		(4,498	)		3,556
Change in foreign currency exchange rate adjustment		(150	)		14
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		1,264			(928	)
Income tax benefit (expense)		720			(563	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(2	)		(15	)
Associated amortization of DAC, VOBA, DSI and DFEL		32			(1	)
Income tax benefit (expense)		(6	)		3
Balance as of end-of-period	$	3,340		$	2,649
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	45		$	33
(Increases) attributable to:
Cumulative effect from adoption of new accounting standard		(45	)		-
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
Change in DAC, VOBA, DSI and DFEL		-			(2	)
Income tax benefit (expense)		-			(1	)
Balance as of end-of-period	$	-		$	25
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	(11	)	$	139
Unrealized holding gains (losses) arising during the period		(71	)		(36	)
Change in foreign currency exchange rate adjustment		153			(14	)
Change in DAC, VOBA, DSI and DFEL		(53	)		6
Income tax benefit (expense)		(8	)		10
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		9			8
Associated amortization of DAC, VOBA, DSI and DFEL		(6	)		(1	)
Income tax benefit (expense)		(1	)		(1	)
Balance as of end-of-period	$	8		$	99
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(17	)	$	(23	)
Foreign currency translation adjustment arising during the period		(10	)		3
Balance as of end-of-period	$	(27	)	$	(20	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(327	)	$	(299	)
Adjustment arising during the period		10			(1	)
Balance as of end-of-period	$	(317	)	$	(300	)

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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 Three
	Months Ended
	March 31,
	2020			2019
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(2	)	$	(15	)	Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		32			(1	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		30			(16	)	operations before taxes
Income tax benefit (expense)		(6	)		3		Federal income tax expense (benefit)
Reclassification, net of income tax	$	24		$	(13	)	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		Net investment income
Interest rate contracts		(3	)		(1	)	Interest and debt expense
Foreign currency contracts		11			7		Net investment income
Foreign currency contracts		1			1		Total realized gain (loss)
Total gross reclassifications		9			8
Associated amortization of DAC,
VOBA, DSI and DFEL		(6	)		(1	)	Commissions and other expenses
Reclassifications before income							Income (loss) from continuing
tax benefit (expense)		3			7		operations before taxes
Income tax benefit (expense)		(1	)		(1	)	Federal income tax expense (benefit)
Reclassifications, net of income tax	$	2		$	6		Net income (loss)