Shares and Stockholders' Equity

3 Months Ended

Mar. 31, 2021

Shares and Stockholders' Equity [Abstract]

11. 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,
	2021		2020
Common Stock
Balance as of beginning-of-year	192,329,691		196,668,532
Stock compensation/issued for benefit plans	711,138		349,636
Retirement/cancellation of shares	(1,891,637	)	(3,809,924	)
Balance as of end-of-period	191,149,192		193,208,244

Common Stock as of End-of-Period
Basic basis	191,149,192		193,208,244
Diluted basis	192,464,319		195,027,909

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,
	2021		2020
Weighted-average shares, as used in basic calculation	191,780,135		195,076,797
Shares to cover non-vested stock	989,064		853,597
Average stock options outstanding during the period	1,063,513		996,248
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(765,162	)	(703,600	)
Shares repurchasable from measured but
unrecognized stock option expense	(1,225	)	-
Average deferred compensation shares	-		1,041,800
Weighted-average shares, as used in diluted calculation	193,066,325		197,264,842

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. This obligation is settled in either cash or LNC stock pursuant to the applicable plan document. For the three months ended March 31, 2020, the effect of settling obligations 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.

AOCI

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



	For the Three
	Months Ended
	March 31,
	2021			2020
Unrealized Gain (Loss) on Fixed Maturity AFS Securities
Balance as of beginning-of-year	$	9,611		$	5,983
Cumulative effect from adoption of new accounting standard		-			45
Unrealized holding gains (losses) arising during the period		(7,420	)		(4,498	)
Change in foreign currency exchange rate adjustment		(44	)		(150	)
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		3,287			1,264
Income tax benefit (expense)		888			720
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		2			(2	)
Associated amortization of DAC, VOBA, DSI and DFEL		(4	)		32
Income tax benefit (expense)		-			(6	)
Balance as of end-of-period	$	6,324		$	3,340
Unrealized Other-Than-Temporary-Impairment on Fixed Maturity AFS Securities
Balance as of beginning-of-year	$	-		$	45
Cumulative effect from adoption of new accounting standard		-			(45	)
Balance as of end-of-period	$	-		$	-
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	(402	)	$	(11	)
Unrealized holding gains (losses) arising during the period		89			(71	)
Change in foreign currency exchange rate adjustment		47			153
Change in DAC, VOBA, DSI and DFEL		14			(53	)
Income tax benefit (expense)		(30	)		(8	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		3			9
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		(6	)
Income tax benefit (expense)		-			(1	)
Balance as of end-of-period	$	(284	)	$	8
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(12	)	$	(17	)
Foreign currency translation adjustment arising during the period		2			(10	)
Balance as of end-of-period	$	(10	)	$	(27	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(266	)	$	(327	)
Adjustment arising during the period		(3	)		10
Balance as of end-of-period	$	(269	)	$	(317	)

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,
	2021			2020
Unrealized Gain (Loss) on Fixed Maturity AFS Securities
Gross reclassification	$	2		$	(2	)	Realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(4	)		32		Realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		(2	)		30		operations before taxes
Income tax benefit (expense)		-			(6	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	(2	)	$	24		Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	1		$	-		Net investment income
Interest rate contracts		(6	)		(3	)	Interest and debt expense
Foreign currency contracts		10			11		Net investment income
Foreign currency contracts		(2	)		1		Realized gain (loss)
Total gross reclassifications		3			9
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		(6	)	Commissions and other expenses
Reclassifications before income							Income (loss) from continuing
tax benefit (expense)		2			3		operations before taxes
Income tax benefit (expense)		-			(1	)	Federal income tax expense (benefit)
Reclassifications, net of income tax	$	2		$	2		Net income (loss)