(Reuters) - Standard & Poor's said it is more likely to cut American International Group Inc's ratings over the next two years now that the U.S. government has sold most of its shares in the insurance company.

S&P said AIG's earnings compared to its obligations are relatively weak for a company with its rating, which makes a downgrade more likely over the next six to 24 months.

The U.S. Treasury on Monday sold $18 billion of AIG shares, bringing its stake in the insurer down to about 21.5 percent. At its peak, the government held more than 90 percent of AIG's shares following the company's $182 billion rescue.

The insurance company has paid off debt it owed the government, meaning AIG has less government support than before, S&P said.

The ratings agency affirmed AIG's counterparty credit rating, used for derivatives transactions, at "A-," the seventh highest level, but revised the outlook to "negative" from "stable."

AIG shares fell 0.5 percent to $33.14 in late-morning trading.

(Reporting By Dan Wilchins; Editing by Ben Berkowitz and Kenneth Barry)