A2 Milk reported net profit of $112.1 million for the six months to December 2025, revenue up 18.8% to $993.5 million, and a $300 million special dividend for shareholders. Buried in the same interim report was the resolution of a shareholder class action that settled for A$62 million, every cent absorbed by the company’s Directors and Officers insurance programme.
The settlement barely registered in the coverage. That should concern every listed company board in the country.
Strong results make the settlement easier to ignore
A2 Milk is genuinely thriving. Underlying EBITDA rose 26% to $164.8 million in the half, and CEO David Bortolussi confirmed the company’s long-held $2 billion revenue target is back on track for FY26, a year ahead of the revised schedule. The company holds $897 million in cash. Forsyth Barr senior analyst Matt Montgomerie described the result as strong and better than analysts expected.
When a company posts numbers like that, a fully insured legal settlement looks like a footnote. That framing is precisely the problem.
Five years of litigation started with a disclosure failure
The class action originated from A2 Milk’s 2020-2021 profit downgrades, when the company repeatedly revised earnings guidance as its China infant formula distribution network collapsed under COVID-19 border restrictions. The daigou personal shopper channel, which had been central to the company’s China growth story, evaporated. Shareholders alleged A2 Milk was too slow to disclose the deteriorating conditions, breaching continuous disclosure obligations under ASX and NZX listing rules.
The A$62 million settlement disclosed in the 1H26 interim report resolved the financial claim. The governance failure that triggered it, a disclosure process that did not escalate material information fast enough, is a different matter entirely.
What insurance does not cover
D&O insurance is designed to absorb exactly this kind of liability. It worked. But the Australian Institute of Company Directors is explicit that coverage does not eliminate reputational damage or address underlying governance failures. Theresa Lewin, national head of professional and financial risks at Gallagher, advises boards to reassess their limits of indemnity given current conditions.
The costs that never appear on a balance sheet are substantial. Years of management time consumed by litigation. Legal coordination costs where, as ANZIIF and Lockton analysis notes, each director may require separate legal representation. Reputational drag during the litigation period. And critically, the repricing of the insurance programme at renewal following a nine-figure claim.
Lockton New Zealand’s Tanya Washer warns that insurers are adopting a cautious approach, especially with businesses grappling with rising debt obligations, and expects the trend to continue as stakeholders seek to recover losses from directors for perceived failures.
A settled A$62 million class action is exactly the kind of claims history that reshapes a company’s D&O renewal conversation for years.
NZ regulators are already sharpening the same tools
A2 Milk’s situation does not exist in isolation. The FMA has been progressively more aggressive on disclosure and governance enforcement. IAG received a NZ$19.5 million fine for systemic governance failures that affected approximately 269,000 customers with $35 million in overcharges, failures that persisted undetected for years. FMG Insurance was found to have double-charged 3,904 customers and applied inconsistent annual increases affecting 54,642 customers between 2013 and 2024.
The pattern in every case is identical. Governance failures that look manageable in real time, that sit dormant for years, and then arrive all at once as enforcement actions or class actions.
The three questions every listed board should be asking
A2 Milk’s recovery is real. FY25 NPAT hit $196 million, the $2 billion revenue target is within reach, and the settlement is behind them. But the governance failure that triggered the class action happened five years ago, and the bill was A$62 million.
For any NZX or ASX-listed board, the questions are straightforward. Are current indemnity limits adequate when each director may need separate representation? Does the continuous disclosure policy have genuine teeth, not just a document in the governance folder but a live escalation process? And do directors understand that insurance absorbs the financial cost but not the reputational cost, the management distraction, or the claims history that follows them into the next renewal?
The fact that A2 Milk’s insurance programme absorbed a nine-figure settlement without touching earnings is not a success story. It is a reminder that the real cost of governance failure is never just the cheque.
Sources
- RNZ: A2 Milk posts net profit of over $112 million for six months to December (2026-02-20)
- NZ Herald: A2 Milk on track to hit $2 billion in revenue (2026-02-20)
- BusinessDesk: The a2 Milk Company in for a $2 billion year (2026-02-20)
- The a2 Milk Company 1H26 Interim Report
- The a2 Milk Company FY25 Annual Report
- AICD: Navigating risk in the evolving D&O insurance landscape
- ANZIIF/Lockton: D&O liability challenges in uncertain economic times (2024-10)
- AInvest: Regulatory Risk and Corporate Governance – Lessons from IAG’s NZ$19.5m Fine
- NZ Herald: FMG admits misleading insurance charges after FMA investigation