ICICI Prudential Life Insurance Company Limited provides life insurance, pension, and health insurance products to individuals and groups in India. ICICI Prudential Life Insurance is one of India’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 31.96k shares during this period. It is widely considered that insider selling stock in their own companies is potentially a bearish signal. A research published in The MIT Press (1998) concluded that stocks following insider selling fell 2.7% compared to the market. However, these signals may not be enough to gain conviction on whether to divest. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.

Check out our latest analysis for ICICI Prudential Life Insurance

Who Are Selling Their Shares?

More shares have been sold than bought by ICICI Prudential Life Insurance’s insiders in the past three months. In total, individual insiders own over 1.77 million shares in the business, which makes up around 0.12% of total shares outstanding.

Insiders that have recently trimmed down their holdings are Abhiroop Pandey and Sandeep Batra .

Is Future Growth Outlook As Bearish?

On the surface, analysts’ earnings growth projection of 20.1% over the next three years provides a satisfactory outlook for the company. However this is inconsistent with the signal company insiders are sending with their net selling activity.

Probing further into annual growth rates, ICICI Prudential Life Insurance is believed to experience decline in top-line growth next year, which could imply some headwinds going forward. This is expected to impact the bottom line with a growth of -9.9% next year, implying cost management may not be efficient enough to bring the company into a positive growth zone.

Insiders’ net selling activity seems to bolster this negative sentiment. Otherwise, they may simply view the current share price is well-above the intrinsic value, providing a prime time to sell.

Did Stock Price Volatility Instigate Selling?

Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements. This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook.

ICICI Prudential Life Insurance’s shares ranged between ₹422 and ₹348.25 over the past three months. This indicates reasonable volatility with a change of 21.18%.

Insiders’ purchases may not be driven by this movement but perhaps they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.