Conseco Inc. (CNO) said Monday that it plans to merge three of its insurance units in order to improve its consolidated capital ratio.

The Indiana-based insurance holding company said the combination, which still needs regulator approvals, will save about $2.5 million annually, although initially it will result in $8 million in charges over the next 12 months. The company expects to complete it next quarter.

Last quarter, Conseco swung to a profit as its investment losses shrank from a year earlier, having emerged from a tumultuous period in which it amended a credit pact after its auditor expressed doubts it could continuing as a going concern.

The firm plans to merge its Conseco Insurance Co. and Conseco Health Insurance Co. units into its Washington National Insurance Co. subsidiary. The change will put all its new sales activity in a single company.

The combination still needs to be approved by Arizona, California and Illinois regulators.

Conseco shares were recently up about 1% at $4.44 in an overall down market. After dropping to just 26 cents in March, the stock has recovered to be down only about 10% so far this year.

-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; joan.solsman@dowjones.com