I wouldn't say it's an exploit just because the AI doesn't use it, it's still a legitimate game mechanic. It'd be kind of like calling naval invasions an exploit since the AI rarely if ever does them (at least, not coordinated invasions).
When I retrain a veteran unit, I almost always lose chevrons. Especially when there are only a handful of men left; I've seen silver chevron units drop to 1 or 2 bronze.
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