11. Shares and Stockholders’ Equity

Common Shares

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



	For the Three				For the Nine
	Months Ended				Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Common Stock
Balance as of beginning-of-period	217,294,051		222,237,262		218,090,114		226,335,105
Stock issued for exercise of warrants	97,076		2,464		119,942		337,394
Stock compensation/issued for benefit plans	38,642		139,179		675,608		1,600,465
Retirement/cancellation of shares	(2,652,963	)	(2,834,287	)	(4,108,858	)	(8,728,346	)
Balance as of end-of-period	214,776,806		219,544,618		214,776,806		219,544,618

Common Stock as of End-of-Period
Basic basis	214,776,806		219,544,618		214,776,806		219,544,618
Diluted basis	217,390,897		222,701,021		217,390,897		222,701,021

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				For the Nine
	Months Ended				Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Weighted-average shares, as used in basic calculation	215,901,268		220,813,693		217,413,480		223,311,993
Shares to cover exercise of outstanding warrants	579,882		668,103		620,580		795,312
Shares to cover non-vested stock	1,467,953		1,614,405		1,512,297		1,572,250
Average stock options outstanding during the period	1,700,026		2,275,826		1,807,340		2,432,171
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(86,040	)	(94,338	)	(86,335	)	(116,577	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the period)	(1,082,651	)	(1,361,094	)	(1,090,868	)	(1,481,524	)
Shares repurchasable from measured but
unrecognized stock option expense	(11,209	)	(44,579	)	(17,381	)	(60,539	)
Average deferred compensation shares	-		-		936,355		926,612
Weighted-average shares, as used in diluted calculation	218,469,229		223,872,016		221,095,468		227,379,698

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 nine months ended September 30, 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 $6 million and $(5) million for the nine months ended September 30, 2018 and 2017, respectively.

AOCI

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


	For the Nine
	Months Ended
	September 30,
	2018			2017
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	3,486		$	1,784
Cumulative effect from adoption of new accounting standards		674			-
Unrealized holding gains (losses) arising during the period		(5,520	)		2,385
Change in foreign currency exchange rate adjustment		(68	)		112
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		1,538			(468	)
Income tax benefit (expense)		858			(717	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(35	)		(26	)
Associated amortization of DAC, VOBA, DSI and DFEL		(15	)		(16	)
Income tax benefit (expense)		11			15
Balance as of end-of-period	$	1,007		$	3,123
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	44		$	25
(Increases) attributable to:
Cumulative effect from adoption of new accounting standards		9			-
Gross OTTI recognized in OCI during the period		-			(1	)
Change in DAC, VOBA, DSI and DFEL		-			-
Income tax benefit (expense)		-			-
Decreases attributable to:
Changes in fair value, sales, maturities or other settlements of AFS securities		(8	)		29
Change in DAC, VOBA, DSI and DFEL		(10	)		(5	)
Income tax benefit (expense)		4			(8	)
Balance as of end-of-period	$	39		$	40
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	(29	)	$	49
Cumulative effect from adoption of new accounting standard		(6	)		-
Unrealized holding gains (losses) arising during the period		98			31
Change in foreign currency exchange rate adjustment		69			(119	)
Change in DAC, VOBA, DSI and DFEL		8			(3	)
Income tax benefit (expense)		(37	)		32
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		15			7
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		(1	)
Income tax benefit (expense)		(3	)		(2	)
Balance as of end-of-period	$	92		$	(14	)
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(14	)	$	(27	)
Foreign currency translation adjustment arising during the period		(6	)		11
Balance as of end-of-period	$	(20	)	$	(16	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(257	)	$	(265	)
Cumulative effect from adoption of new accounting standard		(35	)		-
Adjustment arising during the period		10			(9	)
Balance as of end-of-period	$	(282	)	$	(274	)

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 Nine
	Months Ended
	September 30,
	2018			2017
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(35	)	$	(26	)	Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(15	)		(16	)	Total realized gain (loss)
Reclassification before income							Income (loss) from continuing
tax benefit (expense)		(50	)		(42	)	operations before taxes
Income tax benefit (expense)		11			15		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(39	)	$	(27	)	Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	(1	)	$	6		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)		(1	)		5		operations before taxes
Income tax benefit (expense)		-			(2	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	(1	)	$	3		Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	3		$	3		Net investment income
Interest rate contracts		(6	)		(13	)	Interest and debt expense
Foreign currency contracts		18			12		Net investment income
Foreign currency contracts		-			5		Total realized gain (loss)
Total gross reclassifications		15			7
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		(1	)	Commissions and other expenses
Reclassifications before income							Income (loss) from continuing
tax benefit (expense)		14			6		operations before taxes
Income tax benefit (expense)		(3	)		(2	)	Federal income tax expense (benefit)
Reclassifications, net of income tax	$	11		$	4		Net income (loss)