Set the checkbox "Number of Armies required" for the Military Academy to "0". The KI then will build it (and eventually Armies ). This works fine for me and I have encountered several Armies since I made that change.
Another way is to set the palace to autoproduce Armies. I would suggest the longest possible interval of 100 rounds. This way the KI is forced to have Armies.
If you go to the Creation and Customization Forum, and search Army, you will get a lot of discussions as to how to try to get the AI to use Armies. It is not at all easy.
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