Shares and Stockholders' Equity

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements [Abstract]

14. Shares and Stockholders' Equity

Common and Preferred Shares

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

		For the Years Ended December 31,
		2012	2011	2010
Series A Preferred Stock
Balance as of beginning-of-year		10,072	10,914	11,497
Conversion of convertible preferred stock⁽¹⁾		(540)	(842)	(583)
	Balance as of end-of-year	9,532	10,072	10,914

Series B Preferred Stock
Balance as of beginning-of-year		-	-	950,000
Issuance (redemption) of Series B preferred stock		-	-	(950,000)
	Balance as of end-of-year	-	-	-

Common Stock
Balance as of beginning-of-year		291,319,222	315,718,554	302,223,281
Stock issued		-	-	14,137,615
Conversion of convertible preferred stock⁽¹⁾		8,640	13,472	9,328
Stock compensation/issued for benefit plans		542,125	248,553	414,712
Retirement/cancellation of shares		(20,467,401)	(24,661,357)	(1,066,382)
	Balance as of end-of-year	271,402,586	291,319,222	315,718,554

Common Stock as of End-of-Year
Assuming conversion of preferred stock		271,555,098	291,480,374	315,893,178
Diluted basis		279,087,588	298,225,244	324,043,137

(1) Represents the conversion of Series A preferred stock into common stock.

Our common, Series A and Series B preferred stocks are 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,
			2012	2011	2010
Weighted-average shares, as used in basic calculation			280,648,391	307,216,181	310,005,264
Shares to cover exercise of outstanding warrants			10,150,212	10,150,292	12,260,236
Shares to cover conversion of preferred stock			153,749	173,289	178,720
Shares to cover non-vested stock			1,153,178	813,905	616,314
Average stock options outstanding during the year			570,180	636,989	707,704
Assumed acquisition of shares with assumed
	proceeds from exercising outstanding warrants		(4,685,901)	(4,658,020)	(5,148,473)
Assumed acquisition of shares with assumed
	proceeds and benefits from exercising stock
	options (at average market price for the year)		(394,241)	(427,425)	(464,813)
Shares repurchaseable from measured but
	unrecognized stock option expense		(4,723)	(65,882)	(139,673)
Average deferred compensation shares			-	1,110,722	1,198,468
		Weighted-average shares, as used in diluted calculation	287,590,845	314,950,051	319,213,747

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.

The income used in the calculation of our diluted EPS is our net income (loss), reduced by preferred stock dividends and accretion of discount. These amounts are presented on our Consolidated Statements of Comprehensive Income (Loss).

We have participants in our deferred compensation plans who selected LNC stock as the measure for the investment return attributable to their deferral amounts. For the years ended December 31, 2011 and 2010, the effect of settling this obligation in LNC stock (“equity classification”) was more dilutive than the scenario of settling it 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 $5 million and $2 million for the years ended December 31, 2011 and 2010, respectively.

As of December 31, 2012, we had 10,150,192 outstanding warrants. The warrants, each representing the right to purchase one share of our common stock, no par value per share, had an exercise price of $10.72, and expire on July 10, 2019, and are listed on the New York Stock Exchange under the symbol “LNC WS.”

Accumulated OCI

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

				For the Years Ended December 31,
				2012		2011		2010
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year				$	2,947	$	1,176	$	49
	Cumulative effect from adoption of new accounting standards				-		-		183
	Unrealized holding gains (losses) arising during the year				2,691		3,414		2,528
	Change in foreign currency exchange rate adjustment				14		(5)		(6)
	Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds				(1,233)		(797)		(1,038)
	Income tax benefit (expense)				(480)		(932)		(535)
	Less:
		Reclassification adjustment for gains (losses) included in net income (loss)			(194)		(129)		(135)
		Reclassification adjustment for gains (losses) on derivatives included in net income (loss)			-		-		135
		Associated amortization of DAC, VOBA, DSI and DFEL			(2)		(11)		8
		Income tax benefit (expense)			69		49		(3)
			Balance as of end-of-year	$	4,066	$	2,947	$	1,176
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year				$	(109)	$	(134)	$	(115)
	(Increases) attributable to:
		Cumulative effect from adoption of new accounting standards			-		-		(5)
		Gross OTTI recognized in OCI during the year			(121)		(58)		(97)
		Change in DAC, VOBA, DSI and DFEL			15		13		10
		Income tax benefit (expense)			36		16		30
	Decreases attributable to:
		Sales, maturities or other settlements of AFS securities			129		103		87
		Change in DAC, VOBA, DSI and DFEL			(18)		(20)		(20)
		Income tax benefit (expense)			(39)		(29)		(24)
			Balance as of end-of-year	$	(107)	$	(109)	$	(134)
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year				$	119	$	(11)	$	11
	Cumulative effect from adoption of new accounting standards				-		-		3
	Unrealized holding gains (losses) arising during the year				55		184		(27)
	Change in foreign currency exchange rate adjustment				(12)		7		4
	Change in DAC, VOBA, DSI and DFEL				15		-		-
	Income tax benefit (expense)				(21)		(67)		7
	Less:
		Reclassification adjustment for gains (losses) included in net income (loss)			(15)		(10)		14
		Associated amortization of DAC, VOBA, DSI and DFEL			4		1		-
		Income tax benefit (expense)			4		3		(5)
			Balance as of end-of-year	$	163	$	119	$	(11)
Foreign Currency Translation Adjustment
Balance as of beginning-of-year				$	1	$	1	$	3
	Foreign currency translation adjustment arising during the year				(5)		-		(3)
	Income tax benefit (expense)				-		-		1
		Balance as of end-of-year		$	(4)	$	1	$	1
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year				$	(278)	$	(181)	$	(210)
	Adjustment arising during the year				2		(149)		45
	Income tax benefit (expense)				(34)		52		(16)
		Balance as of end-of-year		$	(310)	$	(278)	$	(181)