Good morning, everybody. I'm Don Southwell, Unitrin's Chairman and Chief Executive Officer. It's my pleasure to welcome you to our 2011 Annual Meeting of Shareholders. I hereby call this meeting to order. At this time, I'd like to recognize the other members of the Board of Directors who are standing for re-election and are present here today. I'd like each of you to stand and face the audience when I call your name, please remain standing. Jim Annable, Secretary to the Federal Advisory Council of the Board of Governors of the Federal Reserve System. Doug Geoga, President and Chief Executive Officer of Salt Creek Hospitality, LLC, a hospitality industry investment firm. Reuben Hedlund, Counsel to the law firm of McGuireWoods. Julie Howard, President and Chief Operating Officer of Navigant Consulting, Inc., a specialty consulting firm. Wayne Kauth, Independent Consultant to the financial services industry and retired partner of Ernst & Young.
Fayez Sarofim, President of Fayez Sarofim & Co., a registered investment advisor. David Storch, Chairman of the Board and Chief Executive Officer of AAR Corporation, a provider of products and services to the worldwide aerospace and government defense industries. Richard C. Vie, Unitrin's Chairman Emeritus. Thank you. I would also like to introduce you to the following members of Unitrin's senior management team, please stand as I call your names. Scott Renwick, Senior Vice President, General Counsel, and Secretary. Dennis R. Vigneau, Senior Vice President and Chief Financial Officer. John Boschelli, Vice President and Chief Investment Officer. Lisa King, Vice President, Human Resources. Ed Konar, Vice President and President of Career Agency. Christopher Moses, Vice President and Treasurer. Richard Roeske, Vice President and Chief Accounting Officer. Dennis Sandelski, Vice President, Tax. Frank Sado, Vice President, Planning and Analysis.
From our operating segments, we have Jim Schulte, Property and Casualty Group Executive and President of Unitrin Direct. Also present with us today are Bjorn Borgen and Scott Malmgren with the registered public accounting firm of Deloitte & Touche, the company's independent registered public accountant. Gentlemen, would you please stand? Mr. Borgen and Mr. Malmgren will be available for questions following the formal meeting. After the formal portion of this meeting, I will make a presentation about the company's operations. Our General Counsel and Corporate Secretary, Scott Renwick, will act as Secretary of this meeting. I am informed by the Secretary that there are more than 55 million shares, or approximately 90.4% of the company's outstanding common stock, are represented by proxies at this meeting. Accordingly, a quorum is present. The meeting is duly constituted to transact business.
If there are any shareholders present who have not yet voted and now wish to do so, please raise your hand. One of the ushers will give you a ballot. Written notice of this meeting was mailed on or about March 28th, 2011, to all shareholders of record as of March 11th, 2011. The polls for voting have been open since the mailing of the proxy materials. The company's transfer agent, Computershare Trust Company, N.A., has been appointed the Inspector of Elections for today's meeting. Philip Meyer from Computershare is here today to oversee the tabulation of shareholder votes. Our agenda this morning consists of voting on the following five proposals. First proposal that we will consider today is the election of nine directors to serve until the next annual meeting of shareholders or until their successors are duly elected. The nominees' occupations are listed in our proxy statement.
The following individuals have been nominated: James E. Annable, Douglas G. Geoga, Reuben L. Hedlund, Julie M. Howard, Wayne Kauth, Fayez S. Sarofim, Donald G. Southwell, David P. Storch, and Richard C. Vie. No nominations from shareholders were received by the company during the notification period prescribed in our bylaws. Accordingly, nominations for directors are now closed. To be elected, each nominee must receive the affirmative vote of a majority of the common stock having voting power present at this meeting in person or by proxy. The second item of business for today is the advisory proposal to ratify the selection of Deloitte & Touche as the company's independent registered public accountant for 2011. To ratify the selection of the company's independent registered public accountant, a majority of the common stock having voting power present at this meeting in person or by proxy must vote in favor of the proposal.
The third item for business today is the proposal to approve the Unitrin 2011 Omnibus Equity Plan. The plan is described in detail in and attached as an Exhibit 2, our proxy statement. To be approved, the proposal must receive the affirmative vote of a majority of the common stock having voting power present at this meeting in person or by proxy. Fourth item of business for today is the advisory proposal on the compensation of the company's named executive officers, as disclosed in the company's proxy statement for this meeting. This proposal, as well as Proposal 5, was required to be included in the ballot this year under SEC regulations adopted pursuant to the Dodd-Frank Act. The fifth and last item of business for today is the advisory proposal on the frequency of future advisory proposals on the compensation of the company's named executive officers.
Shareholders had the option of voting for a frequency of one, two, or three years. If there are any shareholders present who have ballots or proxies to deliver, please raise your hand and the ushers will collect them. I declare the polls for voting closed at this time and would like to announce the preliminary results of the vote that I have received from the secretary. The final vote tabulations will be certified by the Inspector of Elections and filed with the minutes of this meeting. The preliminary results for Proposal 1 indicate that each of the nominees for director has received at least 43.9 million votes, representing approximately 92.7% of the shares present in voting on this matter. Therefore, each of the 9 nominees has been elected as a director.
With respect to Proposal 2, over 54.6 million shares, representing approximately 99.5% of the shares present in voting on this matter, have been voted in favor of the proposal. Therefore, the shareholders have ratified the selection of Deloitte & Touche as the company's independent registered public accountant for 2011. With respect to Proposal 3, over 39.8 million shares, representing approximately 85.8% of the shares present in voting on this matter, have been voted in favor of the proposal. Therefore, the shareholders have approved Unitrin's 2011 Omnibus Equity Plan. With respect to Proposal 4, over 45.1 million shares, representing approximately 97.4% of the shares present in voting on this matter, have been voted in favor of the proposal.
Therefore, a majority of the shareholders have voted to approve the compensation of the company's named executive officers, as disclosed in the proxy statement for this annual meeting. With respect to Proposal five, over 27 million shares, representing approximately 58.4% of the shares present in voting on this matter, have been voted in favor of a frequency of three years for future advisory proposals. Therefore, a majority of the shareholders have expressed a preference for a frequency of three years for future advisory votes on named executive officer compensation. No other matters for consideration at this meeting were brought to the company's attention by our shareholders within the notification period provided in our bylaws. This formal meeting is now adjourned. We will begin the informal session. I meant to have this slide up during all that instead of my name, but hopefully you'll forgive me.
These notes and the footnotes to this presentation will be available on our website should you wish to read them in more detail. This is today's agenda for the informal part of our session. We'll do a quick Unitrin overview, 2010 performance, segment operating results, an update on Fireside Bank, some comments on the first quarter performance, then our priorities as we look to the future. Unitrin is a multi-line insurer. We sell both basic life insurance products and auto and home and other personal lines products through multi-channels of distribution throughout much of the United States. We have a conservative balance sheet and very strong liquidity position. We have a history of opportunistic acquisitions and successful integration. We have an experienced management team with a long-term association with the company. Looking at 2010 performance.
2010 was a very solid earnings year with net income of $184 million. In our P&C business, we maintained a focus on disciplined pricing in a very competitive environment. That resulted in modest revenue declines due to both our pricing actions and our tighter underwriting standards. We also felt some effect of the unusual winter storms in the fourth quarter. We did have very solid earnings overall, including the earnings as shown from the segments there. Fireside Bank exceeded our expectations. The runoff is going exceedingly well. You'll hear a little bit more about that later. We also selectively reduced some concentrations in our investment portfolio while maintaining our yields. One other notable event from the year was refinancing our senior debt.
This slide shows some details about our investment portfolio. You'll note that it is well diversified both across asset classes and in terms of no undue concentration in single names. We have strong cash flow to support this investment portfolio and solid liquidity. Importantly, we reported $328 million of net investment income, which is an important part of our operating results. Capital and liquidity has improved over the past couple of years, both in terms of improved debt to total capital and improved interest coverage. This gives us the balance sheet flexibility to be well positioned to fund growth and to manage risks both. Book value has recovered well since the financial crisis. Part of this comes from earnings. Part of this comes from enhanced asset values. We're also gratified that share price has increased to be closer to book value.
During the financial crisis, we adjusted our dividend to $0.20. Then in 2010, we increased it to $0.22, and again increased it to $0.24 at the first quarter of this year. We also repurchased $22 million of common stock in the first quarter of 2011. This slide shows our capital deployment priorities. Our first priority is to fund organic growth. Of course, that has to be profitable organic growth. In this very competitive environment we find ourselves today, our focus is on maintaining or improving margins and building capital when the pricing environment gets better. Nonetheless, this remains our first priority for capital usage, profitable organic growth. Our second priority is acquisitions. Here, we are looking for a variety of acquisitions.
Top of our list would be bolt-on standard preferred business to, say, for example, bolt on to our Kemper operation or perhaps a geographic expansion of our non-standard auto business or to leverage scale in life insurance. Our third priority is to provide a competitive dividend, and we remain committed to providing our shareholders with a competitive dividend over time. Our final priority, when we have capital beyond the needs of these others, is to return capital to shareholders through a repurchase. We did adopt a $300 million flexible program in February of this year, and we intend to maintain a measured, flexible approach. Now let's look at our operating results for last year. First, Kemper. As I mentioned earlier, Kemper is focused on a disciplined underwriting approach and is also trying to shift its mix of business even more towards packaged offerings.
As a result of this, we were able to improve our underlying combined ratio by 300 basis points from 96.7 to 93.6. Underlying net income correspondingly was up 40%. We're mindful, however, of the recent frequency of storms, particularly tornadoes, hail, and wind. We had a lot of storm activity in the fourth quarter. We've had storm activity at an elevated level for a number of years, and we intend to recognize this in the pricing and distribution of our homeowners product in particular. Unitrin Specialty is our non-standard auto company. Here, the competitive market is particularly intense, especially in commercial auto. Our business remains focused on maintaining margins, and our top line did decline by 10%. We are selectively repricing where needed, and we've launched a new auto product with improved segmentation. Net income, underlying net income held pretty steady, was up a little year-over-year.
In our direct segment, transitioning on several fronts. First, product and distribution. We have a new product which was launched late last year, is now in 11 states. We offer both auto and homeowners, and we have a redesigned customer online experience. We're also working hard to integrate the platform through the multiple acquisitions that we've made over the years and consolidate those platforms for efficiency. We are also focused on profitability improvement. You'll see a significant decline in earned premiums from 2009 to 2010 as we curtailed our marketing spend until we were confident that we had the right kind of acquisition and the right kind of pricing, and we remain focused on profitability. Expect some continued declines in earned premiums this coming year. Our life and health segment continued to perform very well. We had a steady top line even in the midst of a difficult economic cycle.
Retention of career agents improved. The extra agents, working agents out there bode well for 2011. Our healthcare company, Reserve National, reported strong results despite the uncertainties of national healthcare reform. Our earnings, if you exclude that $15 million goodwill write-off, which is a non-cash, non-recurring item, earnings were stable at a very attractive level. To Fireside Bank. Fireside Bank has been in runoff since March of 2009. Consequently, receivables are down 75%. We paid off all deposits in April of 2011, which was an acceleration of our original plan. We have initiated actions to turn in our bank charter. We expect to return in excess of $250 million of capital. Expect that repatriation of capital to begin this year. We are now in the final phase of our wind down. Let's turn to first quarter performance. First quarter net income was $54 million.
Solid 12% earnings growth. The life and health insurance segment performed ahead of expectation. Fireside contributed $8 million in net income. This more than offset some decline in P&C earnings, which decreased because we had less favorable development and higher auto losses. I should also note that we're evaluating the impact of the April storms, particularly the tornadoes that ravaged much of the country, actually. Very broad swath of tornadoes. We are still evaluating the impact of that. Some of it's very recent. We do expect that it'll have an impact on our second quarter earnings, but our primary emphasis at the moment is on meeting our customer needs. One of the best advertisements we have for our business is to pay claims promptly, fairly. We routinely get excellent marks for our claims operation as we step in in the aftermath of a catastrophe.
That is our primary focus at the moment. This lists our priorities going forward. Surrendering a bank charter and repatriating capital from Fireside. Positioning our A&H products to adapt to healthcare reform. Staying disciplined in a very competitive P&C environment. Transitioning our direct business to sustainable profitability. Enhancing our risk management framework and tools. Deploying our excess capital where we have opportunities to be accretive to both earnings and return on equity. That includes organic growth, where we can find margins that are acceptable. That includes acquisitions with a special focus on standard and preferred personal lines. That includes our flexible buyback program. That is the end of my prepared remarks. Are there any questions? If not, this meeting is adjourned. Thank you very much