| Shares and Stockholders' Equity |
14. Shares and Stockholders’ Equity
Common and Preferred Shares
The changes in our preferred and common stock (number of shares) were as follows:
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For the Years Ended December 31,
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2014
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2013
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2012
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Series A Preferred Stock
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Balance as of beginning-of-year
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-
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9,532
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10,072
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|
Conversion of convertible preferred stock (1)
|
-
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(5,818
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)
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(540
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)
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Redemption of convertible preferred stock
|
-
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(3,714
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)
|
-
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Balance as of end-of-year
|
-
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-
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9,532
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Common Stock
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Balance as of beginning-of-year
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262,896,701
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271,402,586
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291,319,222
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Conversion of convertible preferred stock (1)
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-
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93,088
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8,640
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Stock issued for exercise of warrants
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4,356,385
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1,981,856
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-
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Stock compensation/issued for benefit plans
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1,770,430
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1,399,995
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542,125
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Retirement/cancellation of shares
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(12,472,076
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)
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(11,980,824
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)
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(20,467,401
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)
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Balance as of end-of-year
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256,551,440
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262,896,701
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271,402,586
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Common Stock as of End-of-Year
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Assuming conversion of preferred stock
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256,551,440
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262,896,701
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271,555,098
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Diluted basis
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261,538,593
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272,196,891
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279,087,588
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(1) Represents the conversion of Series A preferred stock into common stock.
Our common and Series A 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:
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For the Years Ended December 31,
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2014
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2013
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2012
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Weighted-average shares, as used in basic calculation
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260,877,533
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265,631,377
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280,648,391
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Shares to cover exercise of outstanding warrants
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4,342,860
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9,884,307
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10,150,212
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Shares to cover conversion of preferred stock
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-
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74,582
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153,749
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Shares to cover non-vested stock
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1,522,737
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1,491,483
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1,153,178
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Average stock options outstanding during the year
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3,828,292
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2,873,295
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570,180
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Assumed acquisition of shares with assumed proceeds
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from exercising outstanding warrants
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(894,175
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)
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(2,630,939
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)
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(4,685,901
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)
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Assumed acquisition of shares with assumed
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proceeds and benefits from exercising stock
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options (at average market price for the year)
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(2,679,571
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)
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(2,036,098
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)
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(394,241
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)
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Shares repurchaseable from measured but
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unrecognized stock option expense
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(75,268
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)
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(139,131
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)
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(4,723
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)
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Average deferred compensation shares
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1,041,587
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-
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-
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Weighted-average shares, as used in diluted calculation
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267,963,995
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275,148,876
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287,590,845
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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.
For 2013 and 2012, the income used in the calculation of our diluted EPS was our net income (loss) reduced by preferred stock dividends.
As of December 31, 2014, we had 2,441,742 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 $10.45 as of December 31, 2014, subject to adjustment. The warrants expire on July 10, 2019, and are listed on the New York Stock Exchange under the symbol “LNC WS.”
AOCI
The following summarizes the components and changes in AOCI (in millions):
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For the Years Ended December 31,
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2014
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2013
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2012
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Unrealized Gain (Loss) on AFS Securities
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Balance as of beginning-of-year
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$
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1,609
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$
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4,066
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$
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2,947
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Unrealized holding gains (losses) arising during the year
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3,877
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(5,728
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)
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2,691
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Change in foreign currency exchange rate adjustment
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(47
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)
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19
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14
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Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds
|
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(1,252
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)
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1,834
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(1,233
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)
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Income tax benefit (expense)
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(904
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)
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1,356
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(480
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)
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Less:
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Reclassification adjustment for gains (losses) included in net income (loss)
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10
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(67
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)
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(194
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)
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Associated amortization of DAC, VOBA, DSI and DFEL
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(32
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)
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(29
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)
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(2
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)
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Income tax benefit (expense)
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8
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34
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69
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Balance as of end-of-year
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$
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3,297
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$
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1,609
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$
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4,066
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Unrealized OTTI on AFS Securities
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Balance as of beginning-of-year
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$
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(78
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)
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$
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(107
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)
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$
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(109
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)
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(Increases) attributable to:
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Gross OTTI recognized in OCI during the year
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(12
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)
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(11
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)
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(121
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)
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Change in DAC, VOBA, DSI and DFEL
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2
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1
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15
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Income tax benefit (expense)
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4
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4
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36
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Decreases attributable to:
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Sales, maturities or other settlements of AFS securities
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43
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|
62
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|
129
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|
Change in DAC, VOBA, DSI and DFEL
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(5
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)
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(8
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)
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(18
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)
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Income tax benefit (expense)
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(12
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)
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(19
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)
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(39
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)
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Balance as of end-of-year
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$
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(58
|
)
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$
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(78
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)
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$
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(107
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)
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Unrealized Gain (Loss) on Derivative Instruments
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Balance as of beginning-of-year
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$
|
256
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|
$
|
163
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|
$
|
119
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Unrealized holding gains (losses) arising during the year
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(250
|
)
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143
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55
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Change in foreign currency exchange rate adjustment
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50
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(19
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)
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(12
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)
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Change in DAC, VOBA, DSI and DFEL
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2
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5
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15
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Income tax benefit (expense)
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69
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(45
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)
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(21
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)
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Less:
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Reclassification adjustment for gains (losses) included in net income (loss)
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(19
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)
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(15
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)
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(15
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)
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Associated amortization of DAC, VOBA, DSI and DFEL
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1
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1
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4
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Income tax benefit (expense)
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6
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5
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4
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Balance as of end-of-year
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$
|
139
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|
$
|
256
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$
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163
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Foreign Currency Translation Adjustment
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|
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Balance as of beginning-of-year
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$
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(5
|
)
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$
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(4
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)
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$
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1
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Foreign currency translation adjustment arising during the year
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2
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(1
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)
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(5
|
)
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Balance as of end-of-year
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$
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(3
|
)
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$
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(5
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)
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$
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(4
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)
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Funded Status of Employee Benefit Plans
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|
|
|
|
|
|
|
|
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Balance as of beginning-of-year
|
$
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(219
|
)
|
$
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(310
|
)
|
$
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(278
|
)
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|
Adjustment arising during the year
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|
(96
|
)
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|
140
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|
|
2
|
|
|
Income tax benefit (expense)
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36
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(49
|
)
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(34
|
)
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Balance as of end-of-year
|
$
|
(279
|
)
|
$
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(219
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)
|
$
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(310
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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):
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For the Years Ended
|
|
|
|
|
December 31,
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|
2014
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|
2013
|
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Unrealized Gain (Loss) on AFS Securities
|
|
|
|
|
|
|
|
|
|
Gross reclassification
|
$
|
10
|
|
|
$
|
(67
|
)
|
Total realized gain (loss)
|
|
Associated amortization of DAC,
|
|
|
|
|
|
|
|
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|
VOBA, DSI and DFEL
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(32
|
)
|
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(29
|
)
|
Total realized gain (loss)
|
|
Reclassification before income
|
|
|
|
|
|
|
|
|
|
tax benefit (expense)
|
|
(22
|
)
|
|
|
(96
|
)
|
Income (loss) from continuing operations before taxes
|
|
Income tax benefit (expense)
|
|
8
|
|
|
|
34
|
|
Federal income tax expense (benefit)
|
|
Reclassification, net of income tax
|
$
|
(14
|
)
|
|
$
|
(62
|
)
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized OTTI on AFS Securities
|
|
|
|
|
|
|
|
|
|
Gross reclassification
|
$
|
43
|
|
|
$
|
62
|
|
Total realized gain (loss)
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|
Change in DAC, VOBA, DSI and DFEL
|
|
(5
|
)
|
|
|
(8
|
)
|
Total realized gain (loss)
|
|
Reclassification before income
|
|
|
|
|
|
|
|
|
|
tax benefit (expense)
|
|
38
|
|
|
|
54
|
|
Income (loss) from continuing operations before taxes
|
|
Income tax benefit (expense)
|
|
(12
|
)
|
|
|
(19
|
)
|
Federal income tax expense (benefit)
|
|
Reclassification, net of income tax
|
$
|
26
|
|
|
$
|
35
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gain (Loss) on Derivative Instruments
|
|
|
|
|
|
|
|
Gross reclassifications:
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
(22
|
)
|
|
$
|
(21
|
)
|
Net investment income
|
|
Interest rate contracts
|
|
3
|
|
|
|
3
|
|
Interest and debt expense
|
|
Foreign currency contracts
|
|
-
|
|
|
|
3
|
|
Net investment income
|
|
Total gross reclassifications
|
|
(19
|
)
|
|
|
(15
|
)
|
|
|
Associated amortization of DAC,
|
|
|
|
|
|
|
|
|
|
VOBA, DSI and DFEL
|
|
1
|
|
|
|
1
|
|
Commissions and other expenses
|
|
Reclassifications before income
|
|
|
|
|
|
|
|
|
|
tax benefit (expense)
|
|
(18
|
)
|
|
|
(14
|
)
|
Income (loss) from continuing operations before taxes
|
|
Income tax benefit (expense)
|
|
6
|
|
|
|
5
|
|
Federal income tax expense (benefit)
|
|
Reclassification, net of income tax
|
$
|
(12
|
)
|
|
$
|
(9
|
)
|
Net income (loss)
|
|