It doesn't. At least, if it does I haven't been paying my peasants enough. I did discover that if you put them at the shore, you can use heroes with regenerating abilities to repair them, mysteriously. I don't recall any Greek hero outside the SP campaign with the ability to do that, so I guess you'd have to have the temple built on the shore and worship Apollo. Either that, or make friends with someone in Egypt, who may be kind enough to lend their priests, or a Viking commander who knows a few Valkyries. The latter definitely work, the former two may not, but I think they do.
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Pfft, why would the regenerate automatically? It makes more sense for them to be healed by magical units instead. I'm not actually sure if people as far back as AoM is set had the ability to repair their ships at sea... the earliest such abilities I've ever heard of were on Men 'o War in the 17th/18th century. I could be wrong, like I said, I don't know. But if you're going to mod them in some way, you should either take the EE route and have them regenerate when they reach the dock, or take the AoK way and have villagers repair them on the shore.
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